Bitcoin Bombs by 31% in a Matter of Hours
Bitcoin, the best-performing currency of 2016, has reported its biggest drop in two years just days after reaching a three-year-high of $1,000.
Oil market volatility and uneasy market sentiment surrounding US and EU uncertainties saw many turn to Bitcoin as the new ‘haven’ currency in 2016.
The looming threat of capital controls in China has put a serious dampener on the surge Bitcoin enjoyed late in 2016, reintroducing some of the volatility for which the cryptocurrency has become renowned.
As many economists suspected, with the growth of the Chinese investor class in recent years, Bitcoin appears to have become the main vehicle for virtual capital outflows – in defiance of Chinese currency laws.
In response, Chinese officials are now considering strengthening policies to restrict the movement of the cryptocurrency internationally, as investors have been buying Bitcoins on local exchanges and subsequently selling them offshore, bypassing rules on foreign exchange and cross-border fund flows.
China is the world leader in both the mining and trading of Bitcoin; current estimates place the crypto-currency's total worth above $16bn.
Back in 2013, China declared Bitcoin a commodity not a currency, removing any legal protections typically enjoyed by currencies and extricating it from the jurisdiction of the foreign exchange regulator.