Bitcoin prices approached $7,000 earlier today, reaching a more-than five-month low as traders responded to concerns about regulatory intervention.
The digital currency fell to $7,307.39 around noon EST, its lowest since May 18, CoinDesk figures show.
At this point, the world’s largest cryptocurrency by market value had lost nearly half of its value since reaching nearly $14,000 in June, additional CoinDesk data reveals.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
‘Increased Regulatory Scrutiny’ Fuels Losses
The digital currency suffered sharp declines this morning, falling close to 7% in less than three hours leading up to Facebook CEO Mark Zuckerberg’s scheduled testimony before the United States House of Representatives Committee on Financial Services.
Bitcoin was trading lower today at a time when the broader cryptocurrency was suffering widespread losses, with every single digital asset tracked on the CoinDesk website being in the red at the time of this writing.
Jeff Dorman, chief investment officer of asset manager Arca, stated that “increased regulatory scrutiny” drove the sale of many different cryptocurrencies.
Marouane Garcon, managing director of crypto-to-crypto derivatives platform Amulet, also weighed in on this matter.
“I would definitely say that market uncertainty is due to unfavorable regulatory conversation,” he stated.
“I think there’s more negative news than positive surrounding cryptocurrencies right now,” added Garcon.
“Governments are finally being forced to talk about how it can impact their monetary policies.”
Bearish Market Factors
In addition to speaking to the latest regulatory developments, analysts emphasized that several other variables helped exacerbate today’s losses.
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, noted the key role played by leveraged bets.
“This morning’s move was very similar to the September drop, with many longs liquidated and overly optimistic crypto investors getting caught holding the bag,” he stated.
Dorman also weighed in, stressing that “a lack of positive catalysts coupled with very low trading volumes that makes every move lower an order of magnitude higher than you’d expect.”
However, while trading activity on exchanges may be low, the data provided by these marketplaces may not tell the whole story, said Garcon.
“Trading volumes are low across spot exchanges but DeFi are achieving record highs,” he stated.
“So I think the money is just migrating to something more stable in a time of uncertainty.”
Further, while several analysts pointed to leverage as helping fuel bitcoin’s recent losses, the current market conditions could also facilitate compelling gains.
“The proliferation of derivatives cuts both ways,” noted Christopher Brookins, founder and CIO at Valiendero Digital Assets.
“If momentum reverses or an unexpected catalyst unfolds, price is likely to experience a similarly rapid leap back towards prior resistance levels in mid to late-Q4.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.