Bitcoin falls below $14,000 as South Korea plans crackdown
Seoul/Hong Kong/London/New York: Bitcoin resumed its slide Thursday, dipping below $14,000 as the cryptocurrency’s dizzying drop from a record set 10 days ago intensified.
The latest blow to the world’s biggest cryptocurrency came from South Korea, where the government said it was eyeing options for stamping out a frenzy of speculation, including a potential shutdown of at least some exchanges.
Bitcoin fell as much as 9% to $13,828 overnight, erasing modest gains after the South Korean release, composite Bloomberg pricing shows. The cryptocurrency fluctuated near $14,000 as of 9:20am in New York. It’s now down 28% from the record $19,511 it reached on 18 December.
Bitcoin’s plunge comes after futures contracts started trading on CME Group’s exchange, giving investors new ways to bet on the digital coin’s price moves.
The news from South Korea unnerved traders because the country has been ground zero for a global surge in interest in bitcoin as its rally this year reached 1,600%, prompting the nation’s prime minister to worry over the impact on Korean youth.
While there’s no indication Asia’s No. 4 economy will shutter exchanges that have accounted by some measures for more than a fifth of global trading, the news is a warning as regulators express concerns about private digital currencies. South Korea will require real-name cryptocurrency transactions and impose a ban on the offering of virtual accounts by banks to crypto-exchanges, according to a statement from the Office for Government Policy Coordination.
Bitcoin was trading at about a 30% premium over prevailing international rates on Thursday in Seoul, according to price data from local exchanges, a continuing sign of the country’s obsession, and the difficulty in arbitraging between markets.
“Cryptocurrency speculation has been irrationally overheated in Korea,” the government said in the statement, which comes little more than a week after the bankruptcy filing of one South Korean exchange. “The government can’t leave the abnormal situation of speculation any longer.”
Singapore’s monetary authority warned last week that digital currency buyers should be aware they could lose all their money, joining counterparts who’ve warned about speculative mania surrounding bitcoin, which has surged more than 1,300% this year.
“Regulators are getting so concerned that this is primarily and predominantly a retail phenomenon,” said Stephen Innes, head of trading for Asia Pacific at Oanda. “Regulators not only in Asia but globally are going to start addressing this fact because I don’t think they’ve actually come to terms with what the absolute downside of a complete drop in crypto means for the economy.”
US stocks edged higher amid thinned-out trading between holidays. The dollar touched its lowest level this month, while Treasury yields rose after Wednesday’s slide.
The S&P 500 Index advanced for a second day with trading more than 45% below the 30-day average for this time of day.
The greenback dropped against all major peers on its way to the worst year in more than a decade. Ten-year Treasury yields gained toward 2.43% after sliding the most intraday since the start of December on Wednesday.
The euro was on track for the highest close since September, while core European bonds fell.
The Bloomberg Commodity Index extended its longest rising streak in more than 12 years as gold and copper gained. WTI crude fell below $60 a barrel.
While the Federal Reserve’s three interest-rate hikes this year might have argued for higher US yields and a stronger greenback, instead its low cap on its long-term estimated policy rate and muted inflation have proved to be stronger dynamics.
A softer dollar has been a boon for emerging markets, from Asia to eastern Europe to South America.Bloomberg