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The world of cryptocurrencies is on fire, with the price of bitcoin slumping from $14,755 a piece to $9,928 in the space of a week, having shot up to almost $20,000 in mid-December.
Ethereum, the world’s second largest cryptocurrency, fell from a high of $1,415 at the weekend to under a thousand dollars on Tuesday; its next biggest competitor – finance industry-backed Ripple – fell from a high of $3.40 on January 7 to just under a dollar.
| The volatile price of bitcoin |
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These wild price swings come amid moves from regulators to clarify their stance on cryptocurrencies.
Most recently, South Korea announced it intends to abolish cryptocurrency exchanges, while China is rumoured to roll out a total ban on bitcoin mining. Given South Korea is home to some of the largest cryptocurrency exchanges and most bitcoin mining comes out of China, this is significant.
Whereas coal is mined from the ground using heavy machinery, bitcoin is mined from computers using gargantuan amounts of electricity. If bitcoin isn’t mined, transactions aren’t approved and new bitcoins aren’t produced.
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Kerrie Walsh, |
This could bring chaos to the bitcoin community, says Kerrie Walsh, assistant economist at research house Capital Economics.