In Depth

Bitcoin price: are fraudsters behind latest value plunge?

Cryptocurrency tumbles by 6% but expert says bull run may be around the corner

Bitcoin investors’ hopes have been hit by a sudden slump in values of the cryptocurrency following months of continual gains. 

Prices dropped from highs of around $5,530 (£4,280) on Thursday evening to $5,180 (£4,010) a few hours later - a drop of some 6% - according to ranking site CoinMarketCap

The drop came after New York State Attorney General Letitia James accused Hong Kong-based cryptocurrency exchange owner iFinex Inc of an ongoing fraud, The Wall Street Journal reports. 

The firm allegedly “raided” the reserves of its virtual currency Tether to pay customers who wanted to make withdrawals from its Bitfinex digital coin exchange, says Fortune

The attorney general’s report claims that $850m (£658m) was taken from Tether, a cryptocurrency touted as being pegged to the dollar. 

That amount is believed to account for around 27% of Tether’s dollar reserves, according to Chad Cascarilla, who runs rival cryptocurrency Paxos.

Word of the allegations quickly spread to the visual currency markets, affecting both bitcoin values and rival digital coins Ethereum and Litecoin.

What is today’s bitcoin price?

Following yesterday’s tumble, bitcoin is slowly creeping back up. CoinMarketCap puts today’s value at $5,280 (£4,090) as of 10am UK time, down from a high of $5,630 (£4,360) on 24 April. 

Are the Bitfinex allegations likely to affect future values?

Probably not, given that prices are already recovering.

Prior to Thursday’s slump, Simon Peters, an analyst at online trading site eToro, told the Daily Express that “the stars are aligning for a Bitcoin bull run”.

Values are beginning to edge closer to the $6,000 (£4,650) mark, which has traditionally been a “major support level”, he said. That could lead to a wave of investors selling off their virtual assets, prompting another price drop. 

But “if that sell-off is overcome, and the price remains consistently above $6,000, there would be some serious momentum and belief that we could see the price carry on rising over the next year to around 60% to 70% of the all-time high” of almost $20,000 (£15,500) recorded in December 2017, Peters argued.

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