The price of bitcoin plunged $120 over the past week, and one analyst told CNBC the crypto currency will fall further as it becomes less sensitive to 'good news.'
Bitcoin dropped to $451 in early Asian trade on Tuesday from $571 a week ago, according to CoinDesk. On Monday, the price briefly plummeted to $309 on Bulgarian bitcoin trading platform BTC-e before recovering to $460, the New York Times reported, in what some analysts described as a 'flash crash.'
The move has gone largely unnoticed. A few months ago volatility was the focus of myriad bitcoin headlines after prices rose around 8,092 percent from the start of 2013 to early December and halved two weeks afterwards. The crypto currency has since fallen out of the spotlight, but as regulation efforts and speculation continue there's no dearth of opinions on what's next.
Experts attribute some of bitcoin's recent losses to margin traders that were caught out by the price direction and sold into the market in an attempt to cover their positions, depressing prices further.
The New York Department of Financial Services' 'BitLicense' framework is another source of price pressure. Posted on July 17th and open to a 45-day notice and comment period to solicit public feedback, the framework aims to "strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation," Benjamin Lawsky, superintendent of financial services said in a press release.
Initial responses to the framework suggest that some BitLicense regulations are stricter than current regulations for existing money transmitting businesses and could stifle innovation, undermining bitcoin's appeal.
Good news loses push
Peter Schiff, CEO of Euro Pacific Capital, believes bitcoin will fall further.
"The fact that prices have not rallied on recent good news, like eBay announcing it will accept payment in bitcoin, is a bad sign," said Schiff.
Bitcoin in a new payment method that is yet to be fully regulated and accepted internationally; previously news on developments in this area tends to move prices.
According to Schiff, as more merchants accept bitcoin payment, the impact on prices will likely be downward as "those merchants all sell their bitcoins as soon as they are spent. So if there are not enough new buyers the price will have to fall."
"Also, the recent move to regulate bitcoins is lessening their appeal with early adopters as is competition from 400 other digital currencies," he added.
He has a short-term price target is $350 and expects more downside in the long term prices have become less sensitive to "good news."