Bitcoin plunged 20 per cent to a three-month low on Tuesday, its latest sharp loss following a series of setbacks for the cryptocurrency that, with a collapse across global mainstream markets adding to the selling.
The virtual currency fell to $6,190 for the first time since mid-November, according to Bloomberg News, and represents the latest hammering for a unit that saw a stratospheric 26-fold rise last year.
Tuesday’s collapse comes just six weeks after bitcoin hit a record high of $19,511, fuelled by a flood of speculators looking to make a quick buck, with warnings it could fall another 50 per cent.
Since those heady days the cryptomarket — which includes dozens of other units — has been pounded by news of crackdowns by governments including in China, Russia and South Korea, one of the biggest markets for the sector.
On Thursday, India said it would “take all measures to eliminate” cryptocurrencies’ use as part of a payment system and in funding illegitimate activities, while Japanese authorities raided a virtual currency exchange after it lost $530 million to hackers.
Central bank in Europe, Japan and the United States have also flagged concerns about the unit and this week saw several commercial lenders say they would stop allowing their customers to buy bitcoin through their credit cards owing to debt concerns.
Stephen Innes, head of trading for Asia Pacific at Oanda, said “the dynamics behind the moves are regulatory clampdowns and investors losing confidence in crypto”.
The sell-off on Tuesday was exacerbated by crushing losses on world stock markets, with the Dow on Wall Street suffering its biggest one-day points loss and wiping out all its 2018 gains.
The global rout comes as panicked investors fret over rising US borrowing costs, leading them to cash in profits after a stellar couple of months that have seen many indexes hit record or all-time highs.
Equities have enjoyed months of surges fuelled by optimism over the US economy, corporate earnings and the global outlook.
But while traders have been piling into equities, pushing many global indexes to record or multi-year highs, there has been growing concern on trading floors about elevated US Treasury bond yields — at four-year highs — and the likelihood of fresh Federal Reserve interest rate hikes.
“The risk-off tone is hitting Bitcoin almost as hard as a global regulator and bank scrutiny,” said Greg McKenna, chief market strategist at AxiTrader.
“The latest dent to the Cryptospace has been banks saying they are shutting down the ability of clients to buy bitcoin with their cards.”
“This could end up a full round trip back into the $1,850/$2,966 region.”
50 Cent has discovered that he is a Bitcoin millionaire, thanks to some long-forgotten album sales.
In 2014, he released the album Animal Ambition and became the first artist to accept Bitcoin as payment.
The rapper received more than 700 Bitcoins under the deal, but then forgot about the cryptocurrency, according to celebrity news site TMZ.
The hoard is worth $7-$8m, although the currency’s price volatility means that could change fast.
In 2014, one Bitcoin was equivalent to about $662, but was worth about $11,200 on Thursday according to Coindesk.
“Not bad for a kid from South Side, I’m so proud of me,” 50 Cent – whose real name is Curtis Jackson – wrote on Instagram, confirming the news in a post that featured a screenshot of the TMZ article.
50 Cent also posted a picture of himself on Instagram surrounded by Bitcoins, with the caption: “A little bit coin anyone? LOL. l know l make you sick but excuse me I’m getting to the bag.”
— Jamie Foxx (@iamjamiefoxx) September 18, 2017
Over the last 12 months, several celebrities have been paid to promote and endorse various virtual currencies on social media.
In September, Hollywood actor Jamie Foxx promoted the sale of cryptocurrencies on a trading exchange called Cobinhood.
And in October, US rapper Ghostface Killah, of the rap group Wu-Tang Clan, co-founded Cream Capital – a start-up aiming to develop a network of blockchain ATM cash machines for turning cryptocurrencies into cash for withdrawal.
— AMF (@AMF_actu) January 9, 2018
Recently, French reality star Nabilla appeared on Snapchat on 12 January to encourage her fans to invest in Bitcoin.
“Even if you do not know anything about it, it makes money without investing much,” she said, according to French financial newspaper Les Échos.
But Nabilla’s video caused concern at the French regulator L’Autorité des Marchés Financiers, which promptly tweeted a warning that people do not to invest in Bitcoin due to the risks involved.
The number of mortgages given out by UK banks has dropped to its lowest level for nearly five years, according to industry figures.
UK finance said there were 36,115 seasonally-adjusted mortgage approvals in December, the lowest number since April 2013.
The drop occurred despite a reduction in stamp duty for first-time buyers, which took effect in November.
However experts said it was too soon for that to have made a difference.
Nevertheless, some borrowers may have been put off by the increase in standard variable rate mortgages in December, following the Bank of England’s decision to raise base rates to 0.5% in November.
“December’s marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the Bank of England raising interest rates in early November,” said Dr Howard Archer, chief economic adviser to the EY Item Club.
“Housing market activity has been under pressure from squeezed consumer finances and fragile confidence.”
During December, UK banks approved £7.02bn in mortgage lending – the lowest amount since September 2016.
The number of people who became insolvent jumped by 9.4% in 2017 – the second year running that figures rose.
In total, 99,196 individuals were declared insolvent in England and Wales, up from 90,657 in 2016.
The Insolvency Service said the figures had returned to levels last seen in 2013 and 2014.
The number of people going insolvent has been falling since the financial crisis. However, last year that trend went into reverse.
“The combination of shrinking real wages and the increase in interest rates means that the finances of many Britons are now stretched tight as a drum,” said Brian Johnson, insolvency partner at the chartered accountants HW Fisher & Company.
“With the cost of living still rising at 3% a year, the average person’s pay packet just isn’t keeping up.”
The number of Individual Voluntary Arrangements (IVAs) rose to a record level of 59,220 – an increase of nearly 20% on 2016.
IVAs are a way to avoid full-blown bankruptcy. An individual’s assets are also protected.
However the Money Advice Trust – which runs National Debtline – said some people were being persuaded to take out IVAs who didn’t need them.
“We remain concerned that IVA products are being sold that are unsuitable for people’s circumstances – and believe that the lead generation companies that are a big part of this problem should be brought under the Financial Conduct Authority’s regulatory regime,” said Jane Tully, director of external affairs at the Money Advice Trust.
In Scotland – where the system works differently – there were 2,691 individual insolvencies in the fourth quarter of 2017, a rise of 2.1% on the same quarter in 2016.
In Northern Ireland insolvencies rose by 3.7% over the same period.
Company insolvencies also rose – by 4.2%. In total 17,243 firms in England and Wales went bust in 2017, the Insolvency Service said.
The worst-affected sectors were administration and support services, as well as construction.
The industry body for insolvency and restructuring – known as R3 – said businesses were facing tighter profit margins, with individuals reluctant to pay higher prices.
“Businesses have faced additional headwinds in 2017 with business rate changes, an increase in the National Living Wage, and the final stages of the pensions auto-enrolment roll-out,” said Duncan Swift, deputy vice president of R3.
“Our members have reported the construction and retail sectors as being under the most strain. The construction stresses most obviously demonstrated by Carillion in the early part of 2018.”