The cryptocurrency market was rattled on Friday morning (UTC time), led by an 11.8% price dive in Bitcoin (BTC) across a seven hour period (3:00am-10:00am). Stunningly, the most popular virtual coin shed $20 billion off of its market cap in this timeframe; $17 billion of which came in the final three hours – according to CoinMarketCap.

Being the linchpin of the crypto ecosystem, when Bitcoin experiences such price volatility, the wider market proceeds to follow. Indeed, across the aforementioned timeframe, the worth of the entire market plummeted by over $60 billion – continuing a forgetful few weeks for the virtual coin market that peaked at $832 billion on January 7.

As per usual, the reasons underlying this immediate sell-off are multi-faceted. Firstly, the inaugural CME Bitcoin futures contracts end later today; coming after CBOE last week. Worrying many is the possibility that institutional investment firms will manipulate the price of Bitcoin downward, thus maximising profits before their futures expire. This fear alone can generate a self-fulfilling prophecy, with the anticipation of a price drop leading to panic selling en masse.

These concerns appear unwarranted, however, for restrictions have been put in place by CME, limiting each entity to owning no more than 1,000 contracts (each containing 5 Bitcoin).

In a strange contrast, the price of Bitcoin benefited immensely from the early December news announcing the launch of Bitcoin futures; marking significant progress toward the legitimisation of cryptocurrency.

The second factor affecting today’s price falls is the breaking news out of Japan that a leading Japanese crypto exchange, Coincheck, has been hacked. It was revealed that a payment made on the Ripple Network showed millions of dollars leaving a wallet owned by Coincheck.  Fuelling speculation, the Tokyo-based exchange has suspended all withdrawals (including JPY), halted trading in all cryptocurrencies except Bitcoin, and stopped deposits in NEM. NEM crashed by as much as 25% in value after news broke of the coin’s involvement in this saga.

Coincheck boasts one of the largest userbases and trading volumes in Japan, but is yet to receive approval of their registration application filed last September with the Japanese Financial Services Authority (FSA). Adding to this concern, the FSA has already approved 15 domestic exchanges, including two of Coincheck’s main rivals, Quoine and bitFlyer.

With the painful memory of the 2014 Mt. Gox exchange collapse fresh in the minds of crypto enthusiasts, today’s widespread panic selling may prove to be unnecessarily conservative – given that full details are yet to be divulged.

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