Bitcoin is having a bad year, and it’s only February 2. The cryptocurrency has come under further pressure on Friday and deepened its 2018 loss to over 40 per cent.
Bitcoin declined 7.8 per cent on Friday to $8,300 on the Bitstamp exchange, a major trading venue. It ended last year at $13,800, having climbed as high as $19,666 in a rally spurred by fizzing enthusiasm from a sect of retail traders and increasing interest from institutional investors.
Sentiment has shifted drastically this year, however, as the fledgling market has taken a number of blows. This week, Facebook banned advertisements for cryptocurrencies amid concerns that too many were being used to mislead potential customers.
The Securities and Exchange Commission also this week accused AriseBank and its co-founders of perpetrating an “outright scam” in an initial coin offering that purportedly raised $600m from investors.
In Asia, officials from Japan’s Financial Services Agency on Friday raided the offices of Coincheck, a cryptocurrencies exchange, to monitor its response to a $500m hack.
Thomas Lee, head of research at Fundstrat, said on Thursday that “headlines for crypto have been mostly negative lately”. He said now that bitcoin has fallen below $9,000 investors were “sidelined”, watching for the next support level at $7,800 to $8,000.
Mr Lee noted, however, that evidence of strong interest from millennials in bitcoin, along with signs that demand for bitcoin futures is rising, both represent “positive developments”.
“Bottom line: It has been a terrible few weeks but the fundamental positive story for crypto remains intact,” he said.
On Reddit, where thousands of users discuss the digital currency, sentiment was mixed. Some appeared to grow weary of the popular “hodl” mentality — a term widely used to mean that traders should hold on through declines.
“There is a point where it goes from being ‘buying the dip’ to ‘catching a falling knife’,” said one user. Another responded that it “feels a lot like Mt Gox days”, a reference to the ructions four years ago when Mt Gox, then the world’s biggest cryptocurrencies exchange, collapsed.
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