Bitcoin sinks nearly 20% to 1-week low

CAPE TOWN - Cryptocurrency, bitcoin on Wednesday sank to a one-week low of R201 531.84 at cryptocurrency exchange Bitstamp BTC=BTSP. This caused bitcoin to lose almost a fifth of its value from a peak just three days ago.

Read also: 40% of Bitcoin is owned by 1000 people

The digital currency has been plummeting since it reached a record high of R250 843.37 on Sunday. This high was reached when CME Group launched bitcoin futures, one week after its rival Cboe Global Markets listed the world’s first bitcoin futures.

“The listing of two bitcoin futures makes it easier for institutional players to trade bitcoins. Futures also enable players to go short on bitcoins, which was difficult without liquid futures”, said researcher at NLI Research Institute in Tokyo, Makoto Sakuma.

Bitcoins exponential gains this year, its price soaring about 19 times has prompted caution amongst policymakers.

Singapore’s central bank on Tuesday issued a warning against investment in cryptocurrencies. The bank cited the recent increase in bitcoin prices means that the currency is at a high risk of falling.

South Korea’s Financial Supervisory Service said on Tuesday it does not consider bitcoin and other cryptocurrencies to be currencies of any kind.

Japanese Finance Minister, Taro Aso also on Tuesday cautioned individuals about the cryptocurrency.

Aso said that bitcoin has not been proven to be a credible currency and that he would watch its developments in the near-term.

“There’s no fixed definition on whether it’s a currency or not. This issue is a difficult one,” Aso said after a cabinet meeting.

“It has not yet been proven to be credible enough to become a currency, so I need to watch for a little while more.”

He added virtual currencies may be widely used in countries such as China but that they were less common in Japan, where hard currency is still preferred.

Adding to the lack of confidence in digital currencies is individual Japanese trader, known as Cis. He claims to own 21 billion yen in assets. However, he tweeted over the last 24 hours that he had sold cryptocurrencies.

“Given that he has a lot of followers, his tweets could have had an impact on Japanese traders, which in turn could have moved the market,” Sakuma said.

Bitcoin has since pared losses and last traded at R215 663.96, down 4.3% for the day.

Additionally, Swedish co-founder and chief technology officer (CTO) at Bitcoin.com, Emil Oldenburg says that bitcoin will not have a bright future.

"I would say an investment in bitcoin is right now the riskiest investment you can make. There’s an extremely high risk", said Oldenburg.

The CTO also recently sold his bitcoins and changed over to bitcoin cash due to bitcoin's high transaction costs and lead times.