Bitcoin, the decentralized cryptocurrency and a payment system, saw its prices drop recently after China's Central Bank announced it was investigating exchange platforms trading in the online currency. Confidence in Bitcoin dropped because of fears that Beijing could be leading a crackdown on the digital currency as part of its increasing battle against money flowing overseas.
The Chinese investigation into Bitcoin was announced on Wednesday, January 11. Inspection teams dispatched by the People's Bank of China (PBoC) were sent to several of China's major Bitcoin trading platforms in Beijing and Shanghai. It was concerning for Bitcoin, seeing as most of the world's Bitcoin trading takes place in China.
Earlier in January, Bitcoin's prices surged above $1,100 as a result of investors embracing the currency after the yuan hit eight-year lows. But when the PBoC announced its investigation into Bitcoin, the digital currency's value plunged.
The Bitcoin Price Index, an average of the major exchanges, dropped more than 15 percent to an intraday low of $752.11 on January 11. The following day, prices recovered slightly to $768.76, but still very low compared to the previous week.
'China giveth and China taketh away,' said Gil Luria, an analyst at Wedbush Securities, speaking to Bloomberg News. '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.'
The PBoC investigation was targeting foreign currency exchange, market manipulation, money laundering and financial security risks, according to the bank's statement.