Bitcoin's slump may have been driven by a billion-dollar Ponzi scheme, miners cashing out, and a volume slump
- Bitcoin tumbled 7% in three days to trade below $6,700.
- A billion-dollar Ponzi scheme, miners cashing out, and this trading could be responsible, experts said.
- The biggest cryptocurrency skyrocketed from about $4,000 at the start of the year to almost $13,000 in June, but has nearly halved in price in the past six months.
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Bitcoin has tumbled 7% in three days. A billion-dollar Ponzi scheme, miners cashing out, and a market correction could be responsible.
The biggest cryptocurrency skyrocketed from about $4,000 at the start of this year to nearly $13,000 in June, but has almost halved to below $6,700 in the past six months. It now trades at a fraction of the $20,000 peak it reached in December 2017.
One big driver could be PlusToken, a Ponzi scheme that netted at least $2 billion in cryptocurrency, said Sid Shekar, the cofounder of TokenAnalyst, a crypto data firm.
The fraudsters have cashed out $185 million worth of stolen bitcoin so far, according to analysts at Chainalysis. "Liquidations of large amounts of illicitly obtained funds are likely to drive down the price of cryptocurrencies," they said.
Authorities in China in late June arrested suspects involved in a scam that offered up to 600% returns and incentives for bringing on new recruits, Bloomberg reported this week.
"Since that time, market observers have often pointed to possible sales tied to PlusToken suspects not in custody as one of many reasons for price declines," Bloomberg wrote.
A third factor might be bitcoin miners cashing out their cryptocurrency reserves. They face a double whammy of a lower selling price for bitcoin and the costs of preparing for the next "halvening" - when bitcoin payouts to miners are cut in half - expected in May 2020.
"Miners are selling more of their accumulated supply now in anticipation of the fewer rewards and hardware adjustments they will have to make for the halvening," Shekar said.
Thin trading could also explain bitcoin's dive this week.
"Trading volumes had become so low, that the market stalled and a drop in price was inevitable," Marcus Swanepoel, CEO of Luno, said in a morning note. "The drop may have been linked to a fraud, but the lack of volume magnified the effect."
