Bitcoin (BTC) has bearish flags popping up all around it and this is clearly worrying every avenue of cryptocurrency investor. Many are wondering if this bearish crossover extends below $7,000 because at that level BTC could tumble to the $5,000 price level essentially triggering a selloff.
Over the last 24 hours, the price of BTC is down more than 8% and over the last 7 days the price has slumped for near 10%. The drivers in this correction can be pegged to these factors: the Bitifinex taxation policy and upheaval stemming from UPbit and Bithumb.
First, Bitfinex, an exchange registered in the Virgin Islands but headquartered in Hong Kong, according to a letter posted by the company, may exchange account information with tax authorities in concordance with the US Foreign Account Tax Compliance Act (FATCA) and the Organization for Economic Co-operation and Development Common Reporting Standard (CRS).
The exchange is the fourth-largest with a market capitalization of $686M trading 77 different digital currencies and assets. So, this news sent a huge ripple across the cryptocurrency community. Even though this tax ID forfeiture is not for every trader, the news scared off many large-scale investors fearful of government intervention. This exodus of funds is affecting cryptocurrency markets and hitting BTC hard.
In addition, last month, Bitfinex fell under the “Virtual Markets Integrity Initiative”, an “inquiry into the policies and practices” of crypto trading platforms launched by then-New York Attorney General Eric T. Schneiderman. As part of the program, the exchange was sent a letter, asking them to provide information on operations, internal controls, and other key issues in order to protect cryptocurrency investors and users.
In South Korea, prosecutors raided the office of Upbit, one of the world’s largest exchanges. “Upbit is currently under investigation by prosecutors and is cooperating,” the exchange said in a notice to clients, adding that services such as transactions and withdrawals were unaffected and that client assets were safe. Authorities in Seoul have been leaning towards cracking down on the industry and it finally happened earlier this month. The government also shut down some minor exchanges and outlawed a few ICOs set to launch.
Furthermore, Bithumb was also announced as a primary target FSC’s domestic cryptocurrency probe. In one of the letters recently by South Korea’s financial regulators, they claimed that Bithumb faked balance sheets and also noted concerns about money laundering. Prime Minister Lee Nak-yon said that cryptocurrencies might corrupt the nation’s youth.
This is all important as South Korea is one of the most important locations in the crypto world. The Korean won accounts for more than 10% of all bitcoin trades and also is the primary currency for Ethereum (ETH) as well.
The events in South Korea along with fear of identity exposure from Bitfinex have dragged the overall market capitalization of the industry to a one-month low falling from $372B to $328B.
Moreover, China’s Ministry of Industry and Information Technology continues to release public statements decrying ICOs and following the lackluster Blockchain Week – and the bump that never seemed to come following the conference in New York – ranges are narrowing.