Bitcoin’s two-week sell off continued today, seeing the coin fall to below $8,000 — $7,500 at the time of writing — and hitting levels not seen since mid-April.
Regulatory Moves Impact Bitcoin’s Price
And it’s not just Bitcoin, many other top cryptocurrencies were also in the red today despite bullish calls that coin prices would soar following major blockchain events in New York City that have been taking place over the past week.
Some in the cryptosphere have pointed to recent regulatory news as the key driver of the sell-off. This Monday, financial authorities in the U.S. and Canada announced a cooperative crackdown on initial coin offerings (ICOs) and other cryptocurrency investment schemes, led by the North American Securities Administrators Association (NASAA).
More than 40 state and provincial watchdogs are participating in ‘Operation Cryptosweep,’ which has triggered at least 70 investigations so far.
“This [Operation Cryptosweep] cleaned out a lot of the bad projects,” said CNBC’s Brian Kelly. “That has people a little concerned, and is a short-term hit to sentiment.”
Moving forward though, Kelly points out that these regulatory steps are all part of the maturation that the market needs in order to attract institutional investors. “The projects that they shut down they appear to be junk, they had a real reason to shut them down,” he said.
This week’s crackdown from the NASAA comes amid growing attention from U.S regulators. Last week, the Securities and Exchange Commission (SEC) brought several fraud cases against operators of ICOs and also launched a website to help investors recognize ‘red flags’ when looking for cryptocurrency investment opportunities.
Tom Lee Predicts Rebound
Despite these recent price woes, Fundstrat’s Tom Lee still believes Bitcoin will reach $25,000. In an email to CNBC, Lee attributed today’s drop to ‘typical crypto volatility.’ He also identified three key factors that have him believing the coin will more than triple its current value moving forward.
The first is related to the cost of producing and replicating the cryptocurrency. When Bitcoin was trading at around $8,000 yesterday, Lee appeared on CNBC’s ‘Futures Now,’ where he expressed the belief that the digital currency was actually ‘trading at cost’ because the price of production was actually around that number. With this, it is likely Lee is referring to recent data from Morgan Stanley that puts the Bitcoin mining profitability at just over $8,000. This means that if miners want to turn a profit, the coin in theory has to stay above this number.
Lee’s second factor relates to the catalyst that institutional investors will bring to the cryptocurrency space. “I think institutional investors have gained a lot of interest, and they haven’t really come into crypto yet because there is still some regulatory uncertainty,” he said.
Lee’s third factor relates to data compiled by Fundstrat, which show a historical trend that has him encouraging investors to hold onto the coin. “Historically, 10 days comprise all the performance in any single year of bitcoin’s price,” he said. “If you just took out those 10 days, bitcoin’s down 25 percent a year.”
Lee continued: “So as miserable as it feels holding bitcoin at $8,000, the move from $8,000 to $25,000 will happen in a handful of days.”
Featured image from Shutterstock.