Bitcoin in freefall as regulator squeeze accelerates selling

As was feared, if bitcoin failed to break out of its recent trading range to the upside, it risked falling to the next major support level at the 200-day moving average at around $7,000.

With the cryptocurrency currently trading at $7,541 on US exchange Coinbase, it looks like it may be at or below those levels fairly soon. Bitcoin has dropped 30% in the past week and 45% since the beginning of the year, and almost 60% from its all-time in December near $20,000.

Those with strong stomachs may be looking to buy if the price falls below $7,000 where a bounce might be expect. However, such technical analysis has to take account of sentiment, and there are currently no major positives that will shift the story in the markets to a more optimistic footing.

And it should be remembered that it was only in October 2017 that bitcoin was trading at $5,000, so the price may indeed revisit those levels.

All crypto coins in the top 100 are down today, many more steeply than bitcoin. Ethereum is off 26%, Ripple has taken a 32% hammering and Cardano is crushed, trading at 35%.

The only coin flashing green is DigixDAO (DGD), which announced a partnership with MakerDAO, the project behind the Dai coin which is pegged to the dollar. DGD coin is up 50% probably helped due to the fact that the search for a "stablecoin" to park funds in during periods of market turmoil is a hot topic at the moment, given the Tether issues. More on that below.

The market cap of the cryptocurrency sector has now fallen to $354 billion, having lost more than $100 billion in the past 24 hours.

Blame it on India (and Nigeria)?

The steady drumbeat from regulators continues to unnerve investors.

Miles Eakers, chief market analyst at Centtrip, a foreign exchange and global payments company, sees more pain ahead: "We anticipate there will be more of such protectionist regulation. This is likely to put bitcoin under more strain, causing it to drop to the $8000 a coin level."

In a speech two days ago, the Indian government's finance minister Arun Jaitley let it be known that the authorities did not consider bitcoin legal tender. Introducing the country's budget he said: "The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system."

These remarks were interpreted by some as the government moving to ban cryptocurrencies, but this seems unlikely and is, instead, a continuation of the Indian government's consistent policy of refusing to recognise it as legal tender, and to warn investors against buying into the nascent asset class. In that regard then the Indian government's posture is similar to many other governments around the world.

The worldwide move by financial authorities to regulate more forcibly bitcoin trading activities, saw Nigeria's Senate announced on 30 January an investigation into bitcoin. Deputy Senate President Ike Ekweremadu said the financial committee of the country's senate will "investigate the viability of bitcoin as a form of investment".

This follows comments from the governor of Nigeria's central bank Godwin Emefiele a week ago. He said: "We cannot as a central bank give support to situations where people risk savings to gamble". Bitcoin and other cryptocurrencies have been growing in popularity in Nigeria, especially among middle class millennials.

Facebook doesn't like crypto ads, SEC freezes AriseBank assets

The crypto space has been finding it hard to get a break this year with positive news continuing to be drowned out by developments which, on the face of it, appear negative for cryptocurrency progress, although many market participants welcome policies to encourage stricter regulation as it will help to attract mainstream investors.

Facebook, in what it described as an "intentionally broad" move, announced at the beginning of the week that it was banning all advertising relating to cryptocurrency, in an attempt to weed out the scammers that have been running wild on the social network platform. Facebook intends to reinstate the advertising once it has improved its systems for preventing and detecting fraudsters.

On the same day, news emerged that the US Securities and Exchange Commission (SEC) had been granted a court order to freeze the assets of AriseBank, which has been running an initial coin offering promising to build a decentralised banking platform. It has raised $600 million from investors. The SEC accuses the promotors of falsely claiming it had purchased a bank that was FDIC-insured (Federal Deposit Insurance Corporation).

Co-Director of the SEC's enforcement division, Stephanie Avakian, said: "We sought emergency relief to prevent investors from being victimised by what we allege to be an outright scam."

The SEC action also helped to sour sentiment this week. Also, the theft of $534 million from Japanese exchange CoinCheck last week has not helped matters.

German financial regulator steps in too

In Germany, where Berlin has staked its claim to be the crypto capital of Europe, The Federal Financial Supervisory Authority ordered altcoin exchange Crypto.exchange GmbH to stop offering a service to convert crypto into euro because it was not licensed to do so.

The company, through its btc-now.de website, has been aggressively advertising online, claiming the conversion transactions could be completed in 30 minutes. Bitcoin investors often have to often wait days for their holdings to be converted into fiat and the funds transferred to their bank account.

Many banks refuse to do business with crypto exchanges, which brings us to the matter of the rationale behind stablecoins, the most widely used of which is Tether and its USDT token.

As we reported earlier this week, there are doubts about whether Tether has the dollars to match the issuance of USDT, now at a supply level of 2.3 billion.

Crypto land: The Good, the Bad and the Ugly

These fears were brought to a head when Bloomberg reported this week that the US Commodities Futures Trading Commission had subpoenaed the company and its sister exchange Bitfinex.

It turns out the subpoena was issued in December, but the news still sent shockwaves through the markets as it followed auditor Freidman abandoning the work it had been doing to audit Tether's accounts.

There was some good news…

Buried under that avalanche of bad news there was the important announcement from one of South Korea's biggest e-commerce operations, WeMakePrice, also known as Wemepu, that it will be integrating 12 cryptocurrencies into its payment options.

A spokesperson for the company said: "Integrating cryptocurrencies is a part of our initiative to make payments more convenient for our consumers and clients. We consider mobile fintech apps, points, and cryptocurrencies as efficient payment methods."

And, in a reminder of the value in the blockchain technology, as opposed to the near-term volatility of speculation driven market ups and downs of coins and tokens, logistics giant FedEx is working with the Blockchain in Transport Alliance to develop logsitcs standards for blockchain applications in the industry, according to a report in trade publication FreightWaves. Other members of the consortium include UPS and German enterprise software company SAP.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.