Cryptocurrency is struggling this week as every major instrument with momentum has hit a rut in such a way that confidence in the nascent asset has plummeted. With US regulators investigating an alleged fraud, this sagging confidence has contributed to Bitcoin falling as much 13 percent in a single day—down to $4,051—which brings means the weekly decline has fallen more than 25 percent. You may recall that last December, Bitcoin was trading at $20,000. Fortunately for the flagship crypto, the slide helped to shrink the market a little as rival digital tokens Ether, XRP, and Litecoin all suffered sell-offs.
It has been nothing but stability and growth for cryptocurrency over the past several months so this sudden downturn in the market has left the bulls reeling. Overall, players in the digital assets market have now lost roughly $700 billion in market value since the cryptocurrency peak, in January. As a matter of fact, trading on futures markets (making bets against Bitcoin) have been soaring.
But even knowing of the present scrutiny it is still tough to say, exactly, what caused this latest flurry of sell-offs. Timing, though, is everything and with Bitcoin offshoot, Bitcoin Cash, splitting in two, what has become quite clear is just how chaotic the nature of this community can be. After all, Bitcoin surpassed $14,000 at the top of last year and bottomed out at $6,000 just last week.
To reiterate, there have also been a lot of regulatory concerns. Just a few days ago, in fact, on Friday, the United States Securities and Exchange Commission (SEC) announced civil penalties charged to two cryptocurrency companies who did not register their initial coin offerings as actual securities. Then, on Tuesday, Bloomberg released a report that the United States Department of Justice (DoJ) has been investigating whether the epic rally posted last year might have been fueled by manipulation—at least, in part—with traders artificially driving up Bitcoin using Tether (another popular, though controversial, crypto token).
The examination of Tether is important because it has been the prime suspect in Bitcoin’s rally and crash for some time now. Tether was created by the exchange known as Bitfinex and is pegged to the US dollar. According to the data from the exchange, each tether is connected an actual dollar in a trader’s bank account. That means the collective tethers are worth approximately $2.7 billion actual US dollars.