The price of cryptocurrencies continued to plunge Wednesday amid a major market correction following unprecedented gains in recent months.
Bitcoin, the world’s most valuable cryptocurrency, fell to almost $10,000 Wednesday morning, marking a 50 percent drop from its record high of $20,000 last month.
This follows a similarly dramatic fall Tuesday.
The bitcoin price slump has impacted the entire cryptocurrency market, which has lost more than $200 billion in the space of 24 hours, according to Coinmarketcap.com, which tracks 1,442 digital coins.
The collapse follows a warning from the South Korean finance minister Tuesday that cryptocurrency trading could soon be banned. South Korea is one of the major global hubs for market activity.
The recent skyrocketing price of cryptocurrencies has attracted not only investors but also regulators.
“Increasing value and legitimacy of cryptocurrencies is not only good for investors but also brings attention from regulators and policymakers,” Daniele Bianchi, assistant professor of finance at Warwick Business School, told VICE News. “As bitcoin and altcoins are becoming more mainstream, being constantly in the spotlight, we are seeing regulators becoming more active to crack down on illegal uses.”
South Korea isn't the only country mulling tighter regulations; China has also increased restrictions, particularly on bitcoin mining and trading.
The German Central Bank also weighed in this week, saying regulation on bitcoin needs to be made globally to have any effect. Likewise in France, Finance Minister Bruno Le Maire called for new guidelines on cryptocurrency trading.
“We want a stable economy. We reject the risks of speculation and the possible financial diversions linked to bitcoin,” Le Maire said. The minister recently appointed Jean-Pierre Landau, a noted cryptocurrency skeptic, to head the country’s task force on regulating the industry.
But not all countries are becoming restrictionist. Russia just drafted a new bill for the legalization of cryptocurrency trading in authorized platforms, as Moscow seeks to position itself as a hub for blockchain activity.
This mishmash of regulation globally breeds uncertainty in the market, leading to the type of price drop seen in recent days.
“The bottom line is that, although governments need to put in place efficient regulations that prevent investors getting into difficult situations, the way such regulations are drafted will largely depend on their view of cryptos as a useful financial innovation rather than a threat,” Bianchi said.
The rapid price rise in the value of cryptocurrencies has seen many people jump on the bandwagon in recent weeks.
“It's a combination of emotion, fear and greed at this point,” Lewis Tuff, lead platform engineer with banking app Revolut, told VICE News. “The market is overwhelmed with new investors right now and these are the people who typically panic and sell when their value takes a tumble.”
Seasoned cryptocurrency enthusiasts, however, have seen it all before: