The bitcoin price has dropped below the psychologically important $9,000 level amid a raid by authorities on No. 1 South Korean bitcoin exchange Upbit. Bitcoin’s sell-off was exacerbated by reports that the trustee of Japan’s shuttered bitcoin exchange Mt. Gox was unloading more BTC.
Investors fled Upbit and dragged the bitcoin price down with it to multi-week lows while the other leading cryptocurrencies fell in sympathy. The market cap of the broad cryptocurrency market fell to about $380 billion, shaving nearly $100 billion from last week’s total value, as Bloomberg reported. and revisiting March levels.
Upbit has reportedly been the target of an investigation since March on suspicions that customer funds were transferred from the exchange’s account to one owned by a Upbit official. The police and nearly a dozen investigators reportedly raided the offices of Upbit, the No. 3 cryptocurrency exchange globally based on volume in the past 24-hour period, on Thursday and Friday, combing through the offices in search of a smoking gun tied to allegations of defrauding investors, according to reports citing someone in the Seoul Southern District public prosecutors’ office.
“Upbit is currently under investigation by prosecutors and is cooperating,” said Upbit officials in a statement to customers cited in Bloomberg.
Meanwhile, the exchange noted that customer accounts were deemed “safe”, while transactions including deposits and withdrawals were officially unaffected. But with the nightmares of Mt. Gox and more recently Coincheck not too far in the rearview mirror, investors weren’t taking any chances.
Cryptocurrency market participants have been trying to avoid any over-regulation in the market by engaging with policymakers, and regulators similarly have said they want to avoid rushing into adding laws that would ultimately stifle innovation. But incidents like this, where there are suspicions of fraud at one of the world’s leading bitcoin exchanges, doesn’t help the regulatory cause.
Making matters worse was the anticipated upcoming sale of thousands of bitcoin and bitcoin cash by the trustee of the now-defunct Mt. Gox exchange. Records indicate that some 8,000 BTC and 8,000 BCH were transferred from the exchange’s trust to cold storage in preparation of a sale.
Prior to the latest setbacks, the cryptocurrency markets were on the comeback trail after a volatile first quarter. South Korean regulators have been cracking down on bitcoin exchanges of late, but there are also murmurings that officials could lift the ban that’s currently in place on initial coin offerings (ICOs), which would be a boon for the market.
Bitcoin and the other leading digital currencies have weathered these types of storms in the past, and if anything it serves as a stark reminder to investors not to keep their funds on any trading platform and instead to transfer them to a hard wallet.
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