The price of bitcoin fell below $6,000 early Tuesday morning New York time as top U.S. regulators got set to speak with a Senate committee about cryptocurrencies. The price rebounded to $7,000 after 10 a.m., but the drop below $6,000 raises questions about whether there’s a solid floor for the digital coin.
Regulators are increasingly looking for ways to crack down on bitcoin, which soared in value and popularity last year, but has crashed since mid-December, falling more than 60% from its highs.
Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo will testify before the Senate Banking Committee on Tuesday. Both Clayton and Giancarlo have gotten more vocal in recent weeks about their concerns, and have hinted that regulators could take a closer look at “spot” markets, where bitcoin trades directly, as opposed to just the futures markets where regulators have a clearer role.
And they’re not the only ones — Chinese regulators are looking to block websites that allow people to trade digital coins, whether those sites are based in in China or elsewhere. And Mario Draghi, president of the European Central Bank, called digital coins “very risky assets.”
Big banks including Bank of America (BAC) JPMorgan Chase (JPM), Citigroup (C) and Capital One (COF) are also no longer allowing clients to purchase cryptocurrency with their credit cards.
It would be difficult for regulators to fully shut bitcoin down, given that the cryptocurrency runs on nodes throughout the world, including offshore locations with little oversight. But a crackdown on trading or exchanges could severely limit retail trading of bitcoin. Retail trading on spot exchanges pushed bitcoin higher last year. If that’s curtailed, the coins will have less support.