Bitcoin plunged suddenly on Wednesday after the U.S. Commodity Futures Trading Commission claimed jurisdiction over bitcoin derivatives. It’s only the latest whiff of regulation, and apparently those who invest in the cryptocurrency can’t handle it. However, some are calling this bitcoin price drop a healthy one because of how high it climbed in such a short amount of time.
Bitcoin tanked by about 9% on Wednesday, tumbling by almost $500 at one point to reach a low of $5,109.70. The bitcoin price drop is the cryptocurrency’s biggest in a month, reports Bloomberg, and according to CoinDesk today has brought the lowest price since Thursday as the cryptocurrency surpassed $5,800 on Friday to reach a record high.
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For those who are bullish on the currency, this bitcoin price drop may be an opportunity to get into it or expand their holdings in it. The asset’s price changes a lot and does so very rapidly these days, and CoinDesk calls this bitcoin price drop a “healthy correction, courtesy of overbought technical indicators.”
The cryptocurrency has rallied by over 90% from its September low at $2,980, and CoinDesk said that demand for bitcoin jumped suddenly last week because of speculations that November would bring a “hard fork” in November that could benefit buyers as new cryptocurrency is created. Something similar happened in August when newly created bitcoin cash was handed out to bitcoin investors.
If “dip demand” is seen in November, it would support the rally and set a new higher base price for the currency at $5,000. However, according to CoinDesk, the bitcoin price drop will have to end soon and the bid tone will have to be recovered fast in order to reduce the risk that a below-$5,000 break will occur.
CNBC and Bloomberg link today’s bitcoin price drop with a report released on Tuesday by the Commodity Futures Trading Commission. The report is entitled “A CFTC Primer on Virtual Currencies,” and the agency said it’s intended as an educational tool for “emerging FinTech innovations.” In the report, the U.S. regulatory body said that bitcoin and other virtual currencies are commodities, which means that they fall under its oversight whenever they’re used “in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.”
Among other things, the CFTC also stated that it will work to prevent price manipulation and “ensure the financial integrity of all transactions subject to the CEA” (Community Exchange Act). However, other than cases of fraud or price manipulation, the agency said it “generally does not oversee ‘spot’ or cash market exchanges and transactions involving virtual currencies that do not utilize margin, leverage, or financing.”
One of the reasons bitcoin and other cryptocurrencies are widely used is due to the historical lack of regulation over them, so any hint of regulation is clearly enough to trigger a bitcoin price drop. Other cryptocurrencies also pulled back on Wednesday as a result of the report. Unfortunately for those who are trying to do business and avoid regulation over their monies, the growing population of cryptocurrencies is only going to lead regulators to seek stronger oversight of them.