It looked as if Bitcoin had turned the corner and was heading toward the $7,000 mark, but two Far Eastern incidents – Wednesday’s $32 million Bithumb hack in South Korea, followed on Friday by Japan’s FSA ordering the country’s top exchanges to improve their record on money laundering – saw BTC finally dip below that dreaded $6,000 mark for the first time since October 2017.
Bitcoin – through no real fault of its own – has been playing a dangerous game for most of 2018, and on Friday (June 22) the world’s no.1 cryptocurrency suffered the embarrassment of dipping below a $6,000 valuation on some exchanges – CoinDesk in particular. It was the lowest price for Bitcoin since October 29 2017, and while on that occasion BTC would go on a spectacular climb and weeks later hit an all-time high of $19,900, that scenario looks well-nigh impossible in the current crypto climate.
What Factors Forced BTC Below $6,000?
After the euphoria of 2017, this year has been something of a Horror Story. There are multiple factors that led Bitcoin to the place it’s been for most of the year, and yesterday forced it to a yearly low:
- Facebook, Google and Twitter banning cryptocurrency-related advertising from their platforms in 2018, which not only resulted in a massive reduction in the available online advertising market, but also severely tarnished and stigmatized the crypto industry’s reputation.
- The continued lack of Corporate and Institutional Investment into the crypto industry, a situation hardly helped by the added stigma of being banned from the platforms of Facebook, Google and Twitter.
- The gradual erosion of private investment; thus far what has fired the market has been individuals keen to give crypto a try, and private investors hoping to make a profit. The pool of potential investors is getting smaller – mainly due to continued negative press about the crypto industry
- The threat of severe regulations, particularly in the US via the SEC.
- The perceived inability of crypto exchanges to safeguard digital currency against sophisticated hacking.
All of these factors might possibly play on a Bitcoin owner’s mind and force them to sell at a loss. By the same token, a potential investor who was once keen to purchase Bitcoin may now change their mind because of the constant negativity connected with BTC.
The $32M Bithumb Hack & Japan’s FSA Playing Hardball
Two major incidents in the past few days are perfect examples of how the crypto market – including potential investors – reacts, and how their behavior affects the market.
On Wednesday, South Korean currency exchange Bithumb announced that they had been the victim of a $32 million hack. In a typical display of overreaction, investors panicked to such a degree that the combined market cap value dropped by $17 billion within 24 hours. As a result, Bitcoin, which a week earlier had hit a new low of $6,300 before rebounding up to $6,700, saw all of that good work undone, as within 24 hours it has slipped to a shocking $6,051.
Then, on Friday, the single largest cryptocurrency market per capita – that of Japan – was rocked when it emerged that the Japanese Financial Services Agency (FSA) had ordered several of the country’s largest cryptocurrency exchanges to improve their practices against money laundering. As a result, bitFlyer —Japan’s no.1 exchange — suspended the creation of new accounts while it made security improvements to counter potential money laundering and terrorist financing.
Once again, the fallout from this story was disastrous for the crypto market – Bitcoin in particular, whose value dropped by 9%. BTC – which had rallied back up to $6,400, subsequently plummeted to – according to CoinDesk – $5,938.18, at least for a few hours.
At the time of writing, Bitcoin’s price had improved slightly to $6,152, but its situation remains precarious, and at the mercy of the next bad news story.