Bitcoin price plunges 20 percent on worries about a possible cryptocurrency crackdown

Bitcoin  US Dollar FX Chart Daily

Bitcoin skidded a further 12 percent on Wednesday, marking an nearly halving in value from its peak price, with investors spooked by fears regulators could clamp down on the volatile cryptocurrency that skyrocketed previous year.

Even if such a ban fails to materialise, South Korea could still impose strict new regulations on the market.

Shares of Riot Blockchain (RIOT.O), Marathon Patent (MARA.O), Longfin Corp (LFIN.O), Long Blockchain Corp (LBCC.O) and Social Reality Inc (SRAX.O) all fell more than 10 percent.

Choi Jong-ku, chairman of the Financial Services Commission, told a National Assembly committee meeting that the government will come up with a valid legal basis if it decides to shut down all cryptocurrency exchanges. It was a far cry from its peak close to $20,000 in December, when the virtual currency had risen almost 2,000 percent over the year.

In the wake of this week's bitcoin slide, users are left wondering if they should hold or sell the highly volatile cryptocurrency.

Others pointed to the threat of greater regulation in South Korea and China.

Other major altcoins, including ethereum, ripple, dogecoin, litecoin and monero, were all down, many losing well over 20 per cent. But the Bitcoin slump is particularly severe, with the currency having plummeted below the $10,000 mark for the first time since November.

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While this moment could potentially be a short term pull back, investors can still definitely expect to see volatility swings going forward. It also announced plans to crack down on bitcoin mining in the country and closing domestic access to online platforms and cryptocurrency apps.

Yesterday's decline was followed by South Korea's finance minister Kim Dong-yeon saying that banning trading in digital currencies was "a live option". At the low point of trading, many cryptocurrencies had lost half their value.

A dramatic crash in the cryptocurrency market on Wednesday has been explained - not as a bubble bursting, but as an effect of Chinese New Year.

"Speculative investors are leaving the ship", said Craig Erlam, an analyst at Oanda.

China banned initial coin offerings - a crowdsourced form of IPO for startups using cryptocurrencies - in September and earlier this week called on local exchanges to stop trading in cryptocurrencies.

The chairman and chief executive of Berkshire Hathaway has joined the chorus of voices criticising the digital currency, which endured a rollercoaster ride at the tail end of 2017.

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