Bitcoin fell more than 16% on worries that Chinese authorities are going to tighten their oversight of the digital currency.
The price of bitcoin touched a low of US$761,86 on Wednesday, down more than 16% on the day, and was trading at $777,12 at 1.33pm in New York, according to data compiled by Bloomberg.
It hit an all-time high of $1 161,89 on 5 January.
Officials with the Shanghai branch of the People’s Bank of China and the city’s finance office conducted an on-site inspection at the BTCC online bitcoin exchange, according to a statement from the bank, looking for evidence of violations, such as market manipulation or money laundering, and assessing the safety of customer funds.
BTCC said in a statement it expects to have additional meetings with the regulators this week.
“All operations at BTCC are normal, and we continue to actively work with regulators to ensure that we remain compliant,” the exchange said on its website. “In the meantime, we urge our customers to take a rational and cautious view to news articles which speculate on the visit and discussions.”
The inspection is raising concern that China may tighten its supervision and control over the country’s bitcoin exchanges, which were instrumental in driving up the digital currency in recent weeks.
Increased regulatory scrutiny may dampen demand for bitcoin, which had risen as people sought to circumvent government controls on the Chinese yuan that have made it more difficult to move and use the domestic currency overseas. Consumers had rushed into bitcoin, which isn’t controlled by any government or central bank.
“China giveth and China taketh away,” Gil Luria, an analyst at Wedbush Securities, said in an e-mail. “The rally in bitcoin over the preceding few weeks was likely driven by Chinese capital flight and speculation, which is why concerns about China taking a firmer stance against the use of bitcoin is likely putting pressure on the price.” — (c) 2017 Bloomberg LP