The price of bitcoin took a significant dive Thursday morning following the announcement of a major Hong Kong-based cryptocurrency exchange. BTC China said it would close its doors on September 30, citing new rules from Chinese regulators.
2017 has so far been a whirlwind year for cryptocurrencies. Earlier this this year, Ethereum gained international notoriety following a runaway increase in value that triggered a frantic GPU purchasing spree that left the PC gaming world reeling over graphics card availability and rampant price increases.
While Ethereum miners enjoyed massive gains from their mining operations, cryptocurrency traders also enjoyed wins in their portfolios as the value of the most popular altcoins increased alongside Ethereum. The value of Bitcoin, the granddaddy of all cryptocurrency, also shot up significantly this year. One year ago, Bitcoin was trading for around $600. On September 1, 2017, Bitcoin peaked at just shy of $5,000 per unit.
Things were looking up for Bitcoin traders for most of 2017, but as they say, all good things come to an end. On September 2, Chinese regulatory authorities announced that initial coin offerings (ICOs) are considered illegal, and the country banned projects that receive funding through the practice.
The news of China’s crackdown on cryptocurrency fundraising didn’t immediately cause a panic, but it put the China-based cryptocurrency exchanges on notice, and following “careful consideration,” one of China’s largest exchanges decided to call it quits. BTC China sent a tweet today indicating that the exchange would halt its operations at the end of the month.
The announcement of BTC China left investors scrambling to get their money out before it's too late, which kicked off a rapid plummet of the value of Bitcoin. The currency is currently down more than $550 from yesterday, and it's still trending downward. Ethereum is also taking a big hit, with its value down 16% overnight.
The sudden drop in confidence in cryptocurrencies is further exacerbated by recent comments from a financial industry elite. Jamie Dimon, the current CEO of JPMorgan Chase, recently stated that he believes Bitcoin “is a fraud” and that it would all eventually come crashing down.
Despite the sudden doom-and-gloom attitude towards Bitcoin, the current crash is likely just a blip in long term outlook for the currency. The dip is largely due to the actions of one exchange that kicked off a panic sell, and not a fundamental flaw in the currency itself. Overall, confidence in cryptocurrencies has been on the rise for years, and people are still likely to be drawn to its potential for rapid gains.
Cryptocurrency is a new market, and governments are still struggling to figure out how to regulate this new store of value. When new rules are put in place, there’s bound to be shakeups. In the end, Bitcoin’s value is tied to confidence that its users place in technology, and there’s no shortage of dreamers that have put their faith cryptocurrency being the future of monetary exchange. For those who believe in Bitcoin’s long-term success, sudden drops in value present a potential buying opportunity. Or this could be the beginning of the end. Who knows?