Bitcoin prices continued their long slide today. The cryptocurrency sell-off that began in the middle of the week gathered pace, although market insiders were baffled as to what had triggered the avalanche.
One potential flashpoint was the news that giant investment bank Goldman Sachs had downgraded plans to open a cryptocurrency trading desk.
In a statement, Goldman said, "We have not reached a conclusion on the scope of our digital asset offering."
The Goldman announcement cast a cloud over such optimism.
Separately, regulatory concerns are mounting among investors. The US Securities and Exchange Commission recently maintained its 100% record of rejecting proposals for exchange-traded funds (ETFs) involving cryptocurrencies, turning down proposals for eight such ETFs, having rejected a ninth in July. It is widely expected to reject a tenth such application in the near future.
ETFs are investment vehicles that trade on financial exchanges much as if they were ordinary shares. The SEC has cited extreme price volatility and the danger of manipulation as reasons for turning down these applications.
Adding to the sector’s woes is the increasing regulatory interest in the Initial Coin Offerings (ICOs), through which investors are offered cryptocurrency in return for conventional money.
Regulators in Colorado are probing three cryptocurrency firms over allegations that they conducted unregistered ICOs. Meanwhile, the SEC is looking at ways in which at least some ICOs could be regulated.
Conversely, UK regulators have been more welcoming of cryptocurrencies than those in the US, who appear more concerned about the scope for money laundering and other criminal activity, not least defrauding investors.
Cryptocurrencies have seen explosive growth since Bitcoin appeared in 2010, with the first coins worth less than $1. While private currencies have existed since time immemorial, cryptocurrencies are the product of digital technology.
The pioneer, Bitcoin, claims to be non-inflationary because the technology is structured so that only a limited number of coins can ever be created. So-called blockchain technology means record-keeping is decentralised and everyone can see who has been trading.
Either way, cryptocurrencies, like any other form of money, have value only because people believe that they do.