Cryptocurrencies resumed their slump on Monday, with Bitcoin approaching the $5,000 mark for the first time since October 2017, in the wake of a split of one of the largest major tokens and increased regulatory scrutiny of initial coin offerings.
Bitcoin declined as much as 6.1 percent to $5,119, while so-called alternative coins slumped even more, with Ether tumbling as much as 12 percent and Litecoin cratering as much as 13 percent. XRP, the token associated with Ripple, was the lone gainer among major digital currencies. The Bloomberg Galaxy Crypto Index fell as much as 78.4 percent to a one year-low on a closing basis.
The SEC announced its first civil penalties against two cryptocurrency companies that didn’t register their initial coin offerings as securities. Airfox and Paragon Coin Inc. will each have to pay $250,000 in penalties to compensate investors, and will also have to register their digital tokens as securities, the agency said in a Nov. 16 news release.
The issuers were asked by the U.S. Securities & Exchange Commission to provide refunds to investors, raising concern that other companies that used the proceeds from sales to finance projects could be forced to do the same.
Volatility has returned to cryptocurrencies, with the largest tokens shedding billions in market value since the hard fork of Bitcoin Cash debuted last week. That came as two software-development factions failed to agree on a way to upgrade the offshoot of the original Bitcoin, leading to a computing power arms race. Read about how the Bitcoin Cash clash is costing investors billions
The cryptocurrency industry has now lost more than $660 billion in value from a January peak, according to data from CoinMarketCap.com. Bitcoin is down more than 70 percent from its December 2017 high, the data show.
Thomas J. Lee, managing partner at Fundstrat Global Advisors and a long-time crypto bull, slashed his year-end price target for Bitcoin to $15,000 from $25,000. The target is based on a fair value multiple of 2.2 times the breakeven cost of mining, which the firm pegs at $7,000, according to a report last week.
“Crypto-specific events have led to greater uncertainty in the crypto market, including the contentious hard fork for Bitcoin Cash,” Lee said in the note. Bitcoin’s break below $6,000 “has lead to a renewed wave of pessimism,” he said.