On Wednesday bitcoin fell by more than 10 percent, hitting a one-week low of only $15,800 as reflected on Bitstamp BTC=BTSP, cryptocurrency exchange.
This drop represents close to a twenty percent loss in the cryptocurrency's value since hitting its peak at $19,666 on Sunday of this week. The week had also been capped off with the official entry of bitcoin futures into a major market, the CBOE Global Market.
Makoto Sakuma, researcher at the Tokyo-based NLI Research Institute offers his theory about why we bitcoin futures have been experiencing wild fluctuations, including this week: "The listing of two bitcoin futures makes it easier for institutional players to trade bitcoins. Futures also enable players to go short on bitcoins, which was difficult without liquid futures."
Should Bitcoin Investors Believe the Hype?
Much like the speculative aspect of financial investing on the stock market that is based on tips and suggestions from financial insiders, many bitcoin investors also make decisions based on a payoff strategy that is partially influenced by insiders. The fundamental difference, of course, is about the lack of cryptocurrency regulation that currently exists. In the US, arguably the loudest voices of opposition against bitcoin do not come from bankers or financial analysts: the regulatory organizations often express their frustration about how to find the balance between monitoring the movement of bitcoin, yet at the same time yielding to its independent, unregulated, nature.
Though acknowledging that no plans are in place to regulate bitcoin, in East and Southeast Asian countries, the voices of concern about speculation—as well as frustration about bitcoin's unclear currency status—have been growing:
-Just yesterday, the Monetary Authority of Singapore (MAS) released a statement to the public, urging them to "act with extreme caution and understand the significant risks" involved in investing in cryptocurrencies," over concerns that the market will be flooded with eager investors, adding, "Investors in cryptocurrencies should be aware that they run the risk of losing all their capital."
-The Financial Supervisory Service (FSS) of South Korea released a statement yesterday stating that it does not view bitcoin, or any other cryptocurrencies for that matter, as currencies at all, with FSS Governor Choe Heung-sik adding, "As we don't see virtual currencies as actual types of currency, [it means] that we cannot step up regulation for now."
-Finally, in Japan Finance Minister Taro Aso also made an official statement yesterday when asked about a possible discussion of the cryptocurrency at next year's G20 summit: "There's no fixed definition on whether it's a currency or not...I need to watch for a little while more."
There is also concern that the drop was partially motivated by the actions of a Cis, a prominent Japanese day trader. With an estimated asset worth of 21 billion yen (138.81 million pounds), he tweeted that he had unloaded his cryptic currencies over the course of the last 24 hours: “Given that he has a lot of followers, his tweets could have had an impact on Japanese traders, which in turn could have moved the market,” Sakuma said in response.
Fortunately, bitcoin was able to make a slight recovery, rebounding to $16,939, a loss of only 4.3 percent for the day. Though this is not the biggest loss bitcoin has experienced (November and September witnessed record gains, as well as losses), what is different this time around—as reflected in the statements above—is that more eyes than ever before are following the future of bitcoin.