Bitcoin has lost more than half of its value in the last two weeks, as the virtual currency’s trade in China has been restricted.
Growing numbers of people had been using Bitcoin in China, but local payment companies have been blocked from providing BTC China with clearing services, the firm has claimed.
As a result, use of the virtual currency has slipped from a high of 7,588 yuan (£764) per Bitcoin towards the end of November to 2,560 yuan today, the South China Morning Post reported.
Japan-based MtGox has also witnessed a large fall in the value of the currency, seeing the exchange rate for one bitcoin dropping from $717 to just $480 in Wednesday’s trade.
Emily Spaven, editor of digital currency news site CoinDesk told the BBC that interest in Bitcoin in China has “gone through the roof” in the last few weeks, fuelling a rise in its value.
“People are getting frightened that with the new regulations the country could now drop out of the ecosystem. Going forward, it’s certainly not the end of Bitcoin, but people have been panic selling,” she said.
Bitcoin in 2014
Bobby Lee, chief executive of BTC China, explained the company will continue to run a Bitcoin exchange in China legally, while it will also still allow users to deposit and withdraw Bitcoin.
“We essentially got notice from our third-party provider today that they will discontinue accepting payments for us and new deposits,” he said.
Bitcoin’s rise and fall has been one of the major currency stories of the year, but its future has been cast into doubt by the move from China to restrict its usage in the Asian nation.
Jinny Yan, an economist with Standard Chartered bank, explained Chinese authorities are aiming to keep as many yuan within the country as possible.
He said: “They don’t want to curtail any innovation in the financial sector. However, at the moment any unexpected growth and development in channels that allow by-passing of capital controls will cause anxiety.”
Find out about commodities trading and learn CFD strategies at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.