January was a cruel month for digital currency fans, and February isn’t turning out much better.
Bitcoin has fallen by 5% this morning to $8,521, its lowest level since late November. That means it’s lost more than half its value since peaking near $20,000 in the week before Christmas.
The selloff follows reports that American regulators are investigating whether last autumn’s price surge had been caused by market manipulation.
According to Bloomberg, the US Commodity Futures Trading Commission has been investigating the Bitfinex exchange and a cryptocurrency company called Tether.
Specifically, regulators are curious about Bitfinex’s relationship with virtual currency Tether, which the exchange claims is pegged to the dollar. So in theory, one dollar equals one Tether.
Tether has become a popular way for some investors to buy Bitcoin on exchanges. But the CFTC’s probe feeds into worries that Tether may not be actually backed by the dollar, as Bitfinex has provided little proof of the relationship, critics say. That hazy relationship has fueled concerns that Bitfinex may be simply creating Tether coins out of thin air and using Tether to buy Bitcoin—thereby propping up the price of the latter asset.
Digital currencies have also been hit by the news that Facebook is banning all adverts for cryptocurrencies. India’s finance minister added to their woes, by saying his country doesn’t accept cryptocurrencies as legal tender and pledging to fight their use for “illegitimate activities”.