Bitcoin fell by another $300 on Tuesday after the fallout of a Chinese ban on cryptocurrency crowdfunding methods saw the price of the digital coin slump earlier this week.
The virtual currency fell from $4,584 to $4,350 on Monday following the announcement of a regulatory clampdown on initial coin offerings (ICOs). Many start-ups rely on ICOs as a means to raise funds by selling off new digital tokens to the market. Total ICO investments peaked above $1.2 billion this year.
Although analysts contend that the price of bitcoin shouldn’t necessarily be linked with China’s ICO crackdown, the cryptocurrency hit a low of $4,037 on Tuesday, according to Coindesk’s price index. This follows an all-time high of more than $5,000 over the weekend, meaning the currency fell by almost 20 percent in the space of a few days.
“The price action has certainly been led by this Chinese salvo – but healthy profits and moving traders to take gains off the table too until the panic calms,” Charles Hayter, chief executive and founder of digital currency comparison website CryptoCompare, told CNBC via email.
The bitcoin analyst said that the cryptocurrency crackdown was expected due to “irrational excesses” in the Chinese market.
“The Chinese market has been perhaps the most virulently exuberant in terms of its irrational excesses and across the world regulators are looking to gradually turn up the regulatory heat on this ICO phenomenon,” he added.