Budget 2018: Bitcoin prices slump to lowest this year after India clampdown

Bitcoin has lost more than $44 billion in market value during January amid mounting concerns of increased regulation and the viability of the cryptocurrency. Photo: Reuters

New York/Hong Kong: Bitcoin slumped to its low for the year after seeing more than $44 billion in market value lost during January after India’s finance minister Arun Jaitley announced a clampdown on cryptocurrency in Union Budget 2018.

After reaching a record high of $19,511 on 18 December, Bitcoin has lost more half its value as the digital token has been weighed down by expectations of more government oversight globally, fears of price manipulation, the susceptibility of exchanges to hacking and lingering concern that it’s all just an asset bubble. Facebook announced a ban on cryptocurrency ads this week.

Bitcoin declined as much as 8.7% on Thursday to $9,100, the lowest since November, in part on concern India may crack down on cryptocurrencies. That follows a spate of recent negative headlines, including a $500 million heist from a Japanese cryptocurrency exchange.

“News about India potentially cracking down on cryptocurrencies added to an already bad week in terms of headlines,” said Andrew Se, cryptocurrency trader and co-founder of research website Cryptoprofile.com. “We’re still correcting as the rally had gone too far.”

Bitcoin’s dizzying 1,400% ascent last year, which created $200 billion in new wealth for investors, has made its 30% fall in January all the more painful. The $44.2 billion in market value lost last month is by far a record for the digital currency, whose entire market cap hadn’t come close to that amount until 2017, according to price data from Coinmarketcap.com.

India’s finance minister Arun Jaitley told lawmakers in New Delhi on Thursday the country doesn’t consider cryptocurrencies legal tender “and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” while it will explore the use of blockchain technology.

While major US exchanges launched Bitcoin futures contracts in December, there has been a push back elsewhere. South Korean banned anonymous trades and is considering a ban on exchanges, a move China already took last year.

Naeem Aslam, chief market analyst at TF Global Markets in London said regulatory news are a long-term positive.

“Regulatory pressure is only a blip,” he said. “Speaking with investors, they are comfortable that now we have some regulatory framework around this, this doesn’t deter them but only foster their confidence in the technology.” Bloomberg