By JOSH FRIEDMAN
After soaring to above $1,150 in the first week of 2017, the price of the cryptocurrency bitcoin fell to around $750 Thursday. Bitcoin hit a low of $752.11 early in the day, according to the CoinDesk Bitcoin Price Index.
China is by in large driving the volatility in the price. Beijing imposes capital controls on its citizens, limiting the amount of foreign currency they can buy each year. But, the capital controls do not currently apply to bitcoin, and many Chinese investors purchase the digital currency as a hedge against the yuan, which is declining in value.
Over the first several days of 2017, people in China rushed to acquire bitcoin, causing the price of the cryptocurrency to spike. The price has since plunged as rumors have spread that Beijing will begin imposing strict regulations on Chinese bitcoin exchanges. Over the past week, Chinese central bank officials have been conducting inspections of bitcoin exchanges and holding meetings with their executives.
Zennon Kapron, the founder of the Shanghai-based financial market research firm Kapronasia, told CNN Money that Chinese regulators could classify bitcoin as a foreign currency. That would effectively impose an individual transaction limit of $50,000 per year.
“The market has gone from being led up by the Chinese to dragged down by panic,” Charles Hayter, the CEO of digital currency comparison website CryptoCompare, was quoted as saying in the CNN Money article.
However, Zhou Shoji, the operator of bitcoin hedge fund FinTech BlockChain Group, told CoinDesk that cryptocurrency traders and exchange operators in China are not worried. China’s central bank merely wants to limit investor risk, and it has no intention of harming or limiting use of bitcoin, Zhao said.
“It’s true that there is some panic selling, but old bitcoiners like me aren’t panicking at all,” Zhao told CoinDesk. “Actually it’s a good opportunity to make a profit.”
After appreciating about 130 percent in 2016, bitcoin shot above the $1,000 mark on New Year’s Day. Four days later, bitcoin reached $1,153, coming within $13 of an all-time high.
But, the price then plunged, falling nearly $200 in one hour on Jan. 5. The price quickly rebounded above $1,000, but this week it has primarily been on the downswing.
Bitcoin is trading at around $775 mid-afternoon Thursday UTC.