Cryptocurrencies dropped sharply for the second time in less than 24 hours, sinking towards a nine-month low amid concern that broader adoption of digital assets will take longer than some anticipated.
Bitcoin, the largest cryptocurrency, tumbled as much as 9.8% and was trading at US$6,480, down 6.8%, as of 10am in New York, according to Bloomberg composite pricing. The Bloomberg Galaxy Crypto Index, a gauge of the largest digital assets, likewise pared some of an earlier decline, when it traded near the lowest level since November 2017. Rival coins Ripple, Ether and Litecoin also slipped.
Cryptocurrency bulls who bet an expanding user base would drive up prices have faced a string of recent disappointments. Business Insider reported on Wednesday that Goldman Sachs Group was pulling back on near-term plans to set up a crypto trading desk. This comes after last month’s decision by US regulators to reject another round of Bitcoin exchange-traded fund proposals.
“Their name carries weight across the globe,” said Ryan Rabaglia, head trader at digital asset brokerage OSL in Hong Kong, referring to Goldman Sachs. “When people see their name, their eyes may light up, and they say: OK, we’ve finally made it -- the bigger players are going to start to enter.”
At the same time, enthusiasts drawn to Bitcoin’s original promise of anonymity and freedom from government control were also dealt a blow on Tuesday when veteran Erik Voorhees’s trading platform ShapeShift AG said it will begin asking users for personal information.
Regulatory scrutiny over cryptocurrency trading platforms has grown along with usage amid concerns over money laundering and customer protection. ShapeShift’s move is a sign of the growing formalisation of a market initially known for its libertarian bent. Imposing mandatory Know Your Customer procedures is “not something we want to do” and a “heavy decision done to derisk under duress,” chief executive officer Voorhees said on Twitter.
While the decision may dispel users that prioritise anonymity, it may also help ShapeShift attract users that trade larger amounts of funds that tend to prefer regulated venues, said Vijay Ayyar, the Singapore-based head of business development at Luno, a cryptocurrency exchange.
“Regulators are never going to be OK with not knowing the identities of who’s doing what and who’s buying crypto,” Ayyar said.