The selloff across cryptocurrencies accelerated late on Wednesday, when bitcoin and other digital tokens dropped for the second time in less than 24, sinking to a nine-month low amid growing concern broader adoption of digital assets will take longer than some anticipated following an earlier report that Goldman was suspending its cryptocurrency trading desk plans.
Bitcoin tumbled as much as 10% percent and was trading at $6,408 on Thursday morning, down 7.8%. The Bloomberg Galaxy Crypto Index, a gauge of the largest digital assets, traded near its lowest level since November 2017 as rival coins Ripple, Ether and Litecoin also tumbled in sympathy.
The recent plunge has resulted in the biggest two-day drop in the Bloomberg Galaxy Crypto Index since June.
The Goldman decision to pull back from trading crypto followed more bad news last month, when the SEC rejected another round of Bitcoin ETF proposals.
“Their name carries weight across the globe,” said Ryan Rabaglia, head trader at digital asset brokerage OSL in Hong Kong, referring to Goldman Sachs. “When people see their name, their eyes may light up, and they say: OK, we’ve finally made it — the bigger players are going to start to enter.”
Separately, Bloomberg reported on Wednesday that enthusiasts drawn to Bitcoin’s original promise of anonymity and freedom from government control were also dealt a blow when veteran Erik Voorhees’s trading platform ShapeShift AG said it will begin asking users for personal information.
While the decision may dispel users that prioritize anonymity, it may also help ShapeShift attract users that trade larger amounts of funds that tend to prefer regulated venues, said Vijay Ayyar, the Singapore-based head of business development at Luno, a cryptocurrency exchange.
“Regulators are never going to be OK with not knowing the identities of who’s doing what and who’s buying crypto,” Ayyar said.
And while Bitcoin has plunged before, for now any hopes of broader retail participation (ETFs) or institutional pick up appear to have been indefinitely delayed. Furthermore, even as many banks and institutional investors are dipping their toes into the world of cryptocurrencies, concerns over everything from market manipulation to regulatory uncertainty have prevented institutional adoption. The result has been a 75% collapse in the market cap of virtual currencies which hit a January peak of $202 billion.
What happens next? Technicians are already pointing to $5000 as the next key level for Bitcoin. According to Oanda’s head of Asia Pac trading Stephen Innes, a drop below that threshold may cause losses to accelerate.
Meanwhile, others believe the key support is even closer: if Bitcoin loses $6,000 the bottom will drop out of everything, writes the Investing in Chinese Stocks blog, adding that below the $6,000 level, everyone buying Bitcoin in the last 11 months will be underwater.