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Chinese state media reported that the government planning to stamp out remaining cryptocurrency trading in the country following its crackdown last year.
Chinese state media reported that the government planning to stamp out remaining cryptocurrency trading in the country following its crackdown last year. Photograph: Dado Ruvic/Reuters
Chinese state media reported that the government planning to stamp out remaining cryptocurrency trading in the country following its crackdown last year. Photograph: Dado Ruvic/Reuters

Bitcoin continues rapid slide as Russia and China stoke regulatory fears

This article is more than 6 years old

Bitcoin dropped a further $2,000 in value, leading the general slide across cryptocurrency markets as investor confidence waivers

Cryptocurrencies continued their sharp tumble on Wednesday as bitcoin dropped by over 16% as continued fears of regulation from Russia and China dent investor confidence.

The price of the world’s biggest and best known cryptocurrency fell $2,000 to as low as $10,000, on the Luxembourg-based Bitstamp exchange, for the first time since November, and down from lows of $11,200 on Monday and $12,000 at 2pm GMT Tuesday.

Bitcoin led the fall on other cryptocurrencies, including Ethereum and Ripple, over suggestions that Russia and China may crack down on trading.

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What is bitcoin?

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Bitcoin is a 'cryptocurrency' – a decentralised tradeable digital asset. Invented in 2008, you store your bitcoins in a digital wallet, and transactions are stored in a public ledger known as the bitcoin blockchain, which prevents the digital currency being double-spent. 

Cryptocurrencies can be used to send transactions between two parties via the use of private and public keys. These transfers can be done with minimal processing cost, allowing users to avoid the fees charged by traditional financial institutions - as well as the oversight and regulation that entails. The lack of any central authority oversight is one of the attractions. 

This means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person.

The exchange rate has been volatile, with some deeming it a risky investment. In January 2021 the UK's Financial Conduct Authority warned consumers they should be prepared to lose all their money if they invest in schemes promising high returns from digital currencies such as bitcoin.

In practice it has been far more important for the dark economy than it has for most legitimate uses. In November 2021 it hit a record high of more than $68,000, as a growing number of investors backed it as an alternative to other assets during the Covid crisis.

Bitcoin has been criticised for the vast energy reserves and associated carbon footprint of the system. New bitcoins are created by “mining” coins, which is done by using computers to carry out complex calculations. The more bitcoins that have been "mined", the longer it takes to mine new coin, and the more electricity is used in the process.

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Chinese state media reported that the government planning to stamp out remaining cryptocurrency trading in the country following its crackdown last year, which saw Beijing shut down bitcoin exchanges and ban all initial coin offerings.

The Russian premier Vladimir Putin said on Tuesday that while the Russian Central Bank currently has sufficient powers, that “in broad terms, legislative regulation will be definitely required in future”.

Shuhei Fujise, chief analyst at Alt Design, said: “Cryptocurrencies could be capped in the current quarter ahead of G20 meeting in March, where policymakers could discuss tighter regulations.”

Makoto Sakuma, analyst at Tokyo-based NLI Research Institute, said trading volumes had been low despite the volatility. He said: “I would say the strong rally in bitcoin and other cryptocurrencies we saw last year is over. But while the rally phase is over, I don’t think it is right to say bitcoin is finished.”

According to data from CoinMarkCap, the third-largest cryptocurrency Ripple has dropped to $1.07, down 22.8% in the last 24 hours and down from a high of $3.80 on 4 Jan. Similarly, Ethereum, the second most popular cryptocurrency, was down 15.5% to $926 and down from $1,431 on 13 January.

Bitcoin was fluctuating at around $10,200 on Bitstamp at time of publication on Wednesday.

“Bitcoin is deciding whether this is the moment to crash and burn,” said Steven Englander, head of strategy at New York-based Rafiki Capital. “My conjecture is that cryptocurrency holders are trying to decide whether to abandon bitcoin because its limitations mean it will be superseded by better products or bet that it can thrive despite them.”

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