Regulatory scrutiny sends bitcoin tumbling

NEW YORK • Bitcoin’s rough week headed for a bitter ending.

The virtual currency fell 6% to US$8,760 (RM35,040) at 12:30pm in New York last Friday, after earlier losing as much as 10%.

Bitcoin has slumped more than 20% last week amid increased regulatory scrutiny in the US and Japan, an attempted theft at one of the biggest trading venues, and news that the bankruptcy trustee for Mt Gox has started selling the now-defunct exchange’s holdings to repay creditors.

“The screen is flashing red today and people are getting fearful,” said Caleb Yap, co-founder of Singapore Bitcoin Club. “Weak hands are definitely wanting to sell. If Mt Gox can dump US$400 million of bitcoin just like that and there’s still billions left, the fear is when is the big drop coming.”

Mt Gox’s bankruptcy trustee, Nobuaki Kobayashi, disclosed last Wednesday in Tokyo that he sold about US$400 million of bitcoin and Bitcoin Cash since late September, part of the hoard left behind when the exchange collapsed four years ago. Kobayashi is studying further sales of the US$1.8 billion remaining.

The sale might be “the largest ever liquidation of crypto to fiat”, according to Thomas Lee, head of research at Fundstrat Global Advisors. In a report last Friday, he said that the firm’s “bit- coin misery index” — a gauge of how investors feel about prices — is currently at 19, the lowest level since 2011. Still, the bitcoin bull reiterated his view that the top digital coin will reach US$25,000 by the end of this year.

Signs of growing regulatory scrutiny have added to investor jitters. Last Thursday, Japan’s Financial Services Agency ordered two exchanges to halt operations for a month and penalised four others. That announcement came just hours after a warning from the US Securities and Exchange Commission that many online trading platforms should register with the agency.

Around the same time, Binance, one of the world’s biggest crypto exchanges, said it had been the target of a “large-scale phishing and stealing attempt.” While it said “all funds are safe”, Binance noted that it was unable to reverse some trades from accounts targeted by the hackers.

“These are all growing pains,” said SJ Oh, a Hong Kong-based trader at Octagon Strategy Ltd. “And while hurtful today, the fact that regulators are cracking down will be good for the long run.” — Bloomberg