Image copyright AFP Image caption Bitcoins in circulation are roughly equal to 2,000 million minutes of 2-minute phone calls
Bitcoin’s values have plummeted amid growing concerns about cryptocurrency regulation.
Earlier in the day, the US Securities and Exchange Commission (SEC) issued a warning about trading in digital currencies.
But one expert said the Bitcoin price was unlikely to fall far below its current levels.
The cryptocurrency has been affected by the talk about rules. New comments from officials, as well as alleged insider trading, have pushed its value lower.
Bitcoin’s price has halved from its peak in August. In the first hours of trading on Wednesday, the cryptocurrency was down more than $700 to around $5,480.
The SEC warning
Earlier on Wednesday, the US regulator issued a statement to caution investors about speculative trading in digital currencies, and encouraged owners to report trades to authorities.
It did not mention Bitcoin specifically, but markets pointed the finger at the currency when it issued the warning.
“Some have argued that these activities, in which people bet on whether or not a cryptocurrency or another financial product will rise or fall in value, are legal under current law,” the agency said.
“The problem is that people should know that these are not traditional investments and that there is little basis for assessing their value.”
It added that there were issues with the way in which digital currency exchanges dealt with losses and the risk of fraud.
In other words, buyers should be aware that they are not investing in bitcoin but are gambling on its future.
The SEC statement also raised the issue of virtual currencies created in the hope of sending them to space.
The effect on the market
As the price of Bitcoin dropped – it went down by nearly a fifth on Wednesday – it left other cryptocurrencies to benefit.
These were either significantly higher or stable – at least for the moment.
Vox Bitcoin rose by more than 20% while Ethereum and Bitcoin Cash both shot up around 60%.
But those higher prices do not mean that all cryptocurrencies are equally backed by nothing but cold, hard cash.
One main issue for the cryptocurrency market – with which the SEC’s comments are viewed – is that its value relies entirely on investors’ perception of its future value.
If predictions of a bubble popping are common, then the price could fall as prices are pushed lower and lower.
Image copyright RT
Either way, people are buying bitcoins, even though no-one knows exactly what its future is.
It is a bitcoin city…
In July, El Salvador’s government agreed to host bitcoin trading exchange Bitauto, the first of its kind outside the US.
Bitauto was set up in 2014 by a computer programmer, Abel Berges, who wanted to reach people in his country who lack access to banking services.
Then, in September, President Salvador Sanchez Ceren signed a decree that will allow local institutions to process bitcoin and other electronic currencies.
Until recently, it was considered illegal in the country.
“Bitauto has been a huge success in the region,” the head of El Salvador’s Investment Promotion Agency, Gerardo Guerrero, told local media.
“The next step is to officially recognise the product. We need to create [Bitcoin] trading centres that actually provide services.”
This announcement came on the same day that bitcoin was declared bankrupt in Cyprus.
On Wednesday, the country said it was the fourth public institution to issue a decree in recent weeks to allow trading of bitcoin.
Image copyright Getty Images Image caption Bitcoin has also suffered a series of bans
But this level of popularity is not one which some regulators are happy about.
Last month, China said it was preparing to ban all initial coin offerings (ICOs), the practice of launching “virtual currencies” which are not backed by any security.
During the past couple of years, countries around the world have introduced controls and new regulations around the use of cryptocurrency.
There have been bans on trading in some states. In March, in South Korea, prices of bitcoin fell by a third after authorities ordered exchanges and financial institutions to freeze their accounts.
And South Africa has had to ban initial coin offerings due to worries that they are ripe for manipulation.
On Wednesday, bitcoin fell to a four-month low as Singapore announced new rules for ICOs.