Authentication & Security

Bitcoin Suffers Two Big Blows, Value drops to $451

The Bitcoin price has dropped yet again, and fluctuating around $451 on 18th December 2013. It had a rollercoaster ride over the past 3 months with the price shooting up over 8 times from early 2013 levels. Two weeks back the virtual currency even crossed gold prices with its value rising above $1200 per BTC.

This chart shows you the movement of Bitcoin value over the last 2 weeks.

bitcoinchart1

Source

Bitcoin suffered two big blows recently which may have largely been responsible for the sharp decline in its value:

Blow 1: 

On 5th December 2013, China’s central bank had regulated the Bitcoin by banning financial institutions and payment providers for conducting transactions in the virtual currency. It can be seen in the graph above, that there was a sharp decline in Bitcoin value over 6th and 7th December (Indicated by red columns) soon after the central bank's announcement.

According to China Business News (affiliated with Shanghai government), third part service providers were told by the Chinese Central Bank to stop offering clearing services to online Bitcoin exchanges. The announcement was made on 17th December. “The PBOC statement on Dec. 5 was somewhat vague and there is more clarity now,”  said Zennon Kapron, MD of Financial Consultancy, Kapronasia. “The way it’s reading now is that after the Chinese New Year, you won’t be able to get your money off the platforms.”

All companies that currently offer services are required to end them by Jan 31st, beginning of the Chinese New Year. Following the announcement, Bitcoin prices on BTC China plunged to nearly $535. “The number of banks and payment providers that can transact Bitcoin has shrunk since the ban was announced,” said Kapron.

Blow 2: 

After the announcement by PBOC (People’s Bank of China), third party providers in the country have taken quick steps to stop funding Chinese Bitcoin exchanges. BTC China, the world’s largest exchange, was the first to suffer from this development. The company announced that it had received a notice today morning (18th December, 2013) and had stopped accepting new Yuan deposits onto its marketplace. (See the last Red building in the graph)

This is the message that a user gets when he logs into his BTC China Account:

“Dear BTC China valued customer: Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim. Rest assured that BTC China will continue to operate normally. Please pay attention to our notices for updates, as we find other ways to allow for CNY deposits. We deeply apologize for any inconvenience. BTC China, December 18, 2013.”

The central bank met over 10 third-party payment platforms in Beijing on 16th December, including Alipay, which accounts for nearly 50% of all online transactions in China according to China Business News' website Yicai.

Chiraag Patel

Chiraag Patel is a Senior Reporting Analyst and the Editor of Bitcoin and Virtual Currency channels at Lets Talk Payments. He is an engineer with deep interest in MMORPG, Virtual Banking, Game Currency and Virtual Cash. Chiraag enjoys Reading& Blogging with focus on New Innovation, Technology & Startups in the Payments Space.

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