Bitcoin downturn worsens on news that China plans to ban digital currency exchanges
Bitcoin is headed for its worst week in over two years as a result of reports claiming China would stop exchange trading of all cryptocurrencies by the end of September just one week after instituting a ban on initial coin offerings.
Chinese regulators were informed of the plan to cease trading by a group responsible for overseeing internet finance risks at China's central bank, suggesting the country's lawmakers were aiming to rein in the alarming growth in cryptocurrencies as quick by as much as they possibly could.
Bitcoin, which had gained more than 700% in the twelve months through to August, suffered another sharp drop in value on Friday as BTC China, one of the country's largest cryptocurrency venues, announced it would stop handling trades by the end of September.
The ban was said to only apply to trading exchanges with no plans to halt over-the-counter transactions announced.
The recent surge in Bitcoin trading led to concerns of a bubble and a potential crash from sceptics, with many market observers speculating that China, which accounts for 23% of all Bitcoin trades, would re-open cryptocurrency exchanges when the government had found an opportunity to install certain measures aimed at providing greater oversight of the currency after the Communist Party reshuffle in October.
However, talk of the potentially year-end resumption of trading did very little to comfort traders as Bitcoin dropped 4.52% to $3,080.51 as of 1145 BST.
The weekly 20% slump left many investors speculating about when the cryptocurrency would drop below the psychological threshold of $3,000.
Chris Weston, IG's chief market strategist in Melbourne said the number to watch for was $2,877, Bitcoin's intraday high on 4 August when the cryptocurrency's most recent gains began. Saying it was a "key line in the sand" and "the bulls will want to see this hold."