Bitcoin suffers worst week in months amid regulation fears
Bitcoin (BTC-USD) has suffered its worst week in months, dipping to below $30,000 (£21,900), before recovering slightly, amid rising fears of tighter regulation.
The digital currency, which has soared to all-time highs of around $42,000 in January, is now trading at $32,000 per coin as of Saturday afternoon.
Earlier this month, the City watchdog warned consumers that they should be prepared to lose all their money if they invest in products promising higher returns from virtual currencies such as Bitcoin. The comment kick-started Bitcoin’s recent fall from grace.
“The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the regulator said.
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of products, they should be prepared to lose all their money.”
This week, incoming US Treasury Secretary Janet Yellen also expressed scepticism over Bitcoin, and concern has emerged over a “double spend” phenomenon that would display a flaw in the cryptocurrency’s software.
It comes after the combined value of all Bitcoin tokens in circulation reached half a trillion dollars for the first time ever last month, putting it ahead of Visa and making it the world’s largest financial service.
Bitcoin started 2020 at around $7,000 per coin. Despite its rise in the last year, the cryptocurrency remains extremely volatile and experts continue to remain sceptical about using it as an investment.
According to industry data, around 13% of all Bitcoin in the world, some $80bn out of $600bn, belongs to just over 100 individual accounts, the Telegraph reported. The top 40% of all Bitcoin, roughly $240bn, is held by just under 2,500 known accounts out of roughly 100m overall.
This has stoked fears that Bitcoin “whales” who hold vast sums of the cryptocurrency could crash the market, according to experts.
“The Bitcoin trading market is very thin,” crypto-sceptic David Gerard told the newspaper. “There is not a lot of available volume to trade.The big players can easily move the price.”
“And there are all kinds of trading shenanigans, which would not happen on a regulated market.”
READ MORE: Bitcoin resumes slide after brief pause
However, there have been major moves toward the mass adoption of digital currencies in recent months.
In October, PayPal (PYPL) announced that it would allow the cryptocurrencies on its platform.
The California-based payments platform said the launch of its new service would allow customers to buy, hold and sell cryptocurrency directly from their PayPal account.
US account holders will be able to deal in digital coins, including Bitcoin, Ethereum, Bitcoin Cash and Litcoin in the coming weeks and plans to expand to Venmo and some countries in the first half of 2021.
Customers will be able to use their cryptocurrency holdings to pay for goods and services at PayPal’s 26 million merchants worldwide from early next year. However, merchants will not receive virtual coin payments, with cryptocurrency payments being settled using fiat currencies, such as the US dollar, the company said.
PayPal has partnered with Paxos, a New York chartered trust company, to provide cryptocurrency trading and custodial services.
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