Bitcoin falls 20pc as corrections and regulation concerns deal a hard blow to crypto-linked stocks

PUBLISHED : Tuesday, 16 January, 2018, 11:29pm
UPDATED : Wednesday, 17 January, 2018, 4:14am

The crypto bubble appears to be deflating amid investor speculation over regulatory crackdowns, with bitcoin slumping by as much as 20 per cent to a four-week low as of 11:20am EST on Tuesday.

It traded as low as US$11,191.59 on the Luxembourg-based Bitstamp exchange. By 4:10pm EST on Tuesday it had edged up to $11,637, but that was still down by around 14 per cent, leaving it on track for its biggest one-day fall since September.

Bitcoin’s slide triggered a sell-off across the broader cryptocurrency market, with biggest rival Ethereum down 23 per cent on the day at one point, according to trade website Coinmarketcap. Ripple, meanwhile, tumbled 33 per cent.

Jamie Burke, chief executive of Outlier Ventures, a venture capital firm that is one of the biggest holders of top-10 cryptocurrency IOTA, said the belief the market was overdue a correction was making traders jittery and that was exacerbating the scale of the moves.

“Anybody that understands the technology knows there’s going to be a correction – it’s going to be a big correction and it’s going to be indiscriminate, because there are no established fundamentals for anybody to distinguish between where there is and isn’t value,” Burke said.

“There’s no way you can rationalise that there’s any value in the market at the moment; everything is significantly overpriced,” he added. Burke holds a number of top-20 cryptocurrencies in a personal capacity.

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It has also been affected by South Korean plans to ban virtual coin exchanges, although they have not yet been finalised as of Monday, according to the country’s finance minister, Kim Dong-yeon.

Likewise, firms that touted their links to the burgeoning blockchain industry, including Riot Blockchain Inc, Inc and DPW Holdings Inc, saw their shares tumble on Tuesday.

DPW Holdings is one of the biggest peripheral losers from the slide so far, down as much as 21 per cent in early US trading.

The company’s Coolisys Technologies unit is working on advanced technology power systems for digital mining of cryptocurrencies.

Riot Blockchain, which rebranded as a blockchain company in October, fell as much as 13 per cent while, exposed to the craze through a subsidiary called Medici Ventures, fell 8 per cent.

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Eastman Kodak Co, which saw its shares jump almost 200 per cent last week after the company said it is working with WENN Digital to offer a blockchain-based service for paying photographers, declined as much as 13 per cent.

And Metropolitan Bank – the issuing bank for a bitcoin debit card called Shift Card – is down 2.7 per cent.

Still, not all bitcoin-linked companies are falling. Long Blockchain Corp, the unprofitable iced-tea company formerly known as Long Island Iced Tea Corp, is little changed after earlier rising as much as 9.2 per cent.

Other stocks to watch during the day include semiconductor stocks Advanced Micro Devices Inc. and computer hardware producer Nvidia Corp, which have also benefited from the mania for mining digital coins.