Bitcoin, collecting dust. Top banks stopping clients from using their credit cards to buy bitcoin.... [+] Other cryptos falling as a result. (Photographer: Marlene Awaad/Bloomberg)
Bitcoin has totally gone out of favor. If it had a real entity behind it, Bitcoin Inc. would need to hire a crisis PR firm and fast. The king of cryptocurrency is down 41% in four weeks. As a result, the market cap of cryptocurrencies traded worldwide is now down by half, based on data from Coinmarketcap.com.
Here's why everyone has turned on it. China's regulators will reportedly block local investor access to cryptocurrency exchanges anywhere in the world, not just in mainland China. If you're a Chinese gambler in crypto, it will become even harder to buy from your laptop in Shanghai using exchanges in Hong Kong or Singapore.
Mobile payment systems firm Stripe said in January it will no longer accept Bitcoin as payment. At least four other e-commerce operators have said the same, including Microsoft, which is no longer accepting Bitcoin.
On Sunday, Lloyds Banking Group added its name to a chorus of American banks no longer allowing their credit card holders to buy cryptocurrencies on debt.
"Across Lloyds Bank, Bank of Scotland, Halifax and MBNA, we do not accept credit card transactions involving the purchase of cryptocurrencies," a company spokeswoman told Reuters.
Bitcoin investors need to program a stop-loss at these levels, says Fernando Pertini, founder of Millenia Asset Management in San Jose, Costa Rica.
"I believe we will see Bitcoin back to $2,500," says Millenia's fund manager. "Maybe even lower."
Bitcoin: going down. (Photo Illustration by Chesnot/Getty Images)
See: Goldman Sachs: Bitcoin Is Money -- Forbes
Here's One Reason Why Bitcoin Is In Freefall -- Forbes
The Market Has Become 'Way Too Complacent' -- Forbes
Bank of America, Citigroup, JP Morgan, Capital One and Discover have also banned their customers from purchasing cryptocurrencies on the exchanges.
Other major banks could follow suit. This would force cryptocurrency buyers to either switch credit cards (an easy solution) or risk sending checks to exchange operators that are notoriously slow as it is.
With retail and banks turning on Bitcoin, frustration is mounting. The walls are closing in around cryptos. Newcomers to the market have only lost money. That's a very different story from the last five years. Bitcoin was trading at just $15 or so in December 2012. It hit an intraday high of nearly $20,000 in December 2017. Many smaller cryptocurrencies started the year doubling in value in a matter of days, surfing Bitcoin's wake.
Visa ended its relationship with a renowned cryptocurrency credit card provider called WaveCrest last month. Visa said WaveCrest didn’t comply with their rules.
The Visa news reminds investors that Bitcoin is not a usable currency. At least not in the mainstream.
Lloyds Bank bans customers from buying cryptocurrencies on their credit cards. (AP Photo/Kirsty... [+] Wigglesworth)
"Bitcoin's problem is how it works as a payment, from both a reliability standpoint and from a cost standpoint," says Xiahong Lin, founder of Bodhi, a China-based decentralized prediction market platform. "When you add price volatility to this, these factors make Bitcoin less attractive as a currency and more attractive as a store of value."
But using it as a store of value is now harder than it was just a week ago.
The retail bank ban makes it harder to buy cryptocurrencies.
Big banks have been against Bitcoin forever, fearing it could radically disrupt their business models. Financial institutions are only now catching up with the concept of the blockchain, the e-ledger technology that makes Bitcoin viable. They feel they have no need for Bitcoin.
"Banks have used excuses such as higher volatility and money laundering to play down the concept of cryptocurrency, particularly Bitcoin," says Naeem Aslam, chief market strategist for ThinkMarkets in London and aForbescontributor.
In London, some lenders have opted to turn down mortgage applications for clients who have made capital gains in cryptocurrencies. The idea is that if a customer is relying on crypto for mortgage payments, the banks are taking on too much risk.
"The banks are using this as a cover by saying that the source of funds can’t be verified when in fact they have no clue how to factor that into their accounts," says Aslam, who has been a cryptocurrency bull for the last several months.
With retail shunning Bitcoin, and credit cards shutting down access, the entire cryptocurrency market is shrinking. Less demand means weaker prices for Bitcoin.
The investor market for this currency is almost entirely driven by retail investors, especially those in China, Singapore, Japan and South Korea.
"I'd take these declarations with a pinch of salt," says Aslam about credit cards banning crypto purchaess. "Could there be something bigger coming? We know that JP Morgan, Berkshire Hathaway and Amazon teamed up to form an independent health care company. Nothing can be factored out."
Water cooler chatter is that the threesome may use blockchain technology to build a cheaper payment system for the health insurance market. No word yet as to whether they would issue a utility token, a niche form of cryptocurrency used primarily for one product and one service, but also traded on the exchanges like securities.
China continues to crack down on bitcoin. India is next. That potentially pulls a billion people out... [+] of the cryptocurrency market. (Photo by S3studio/Getty Images)
Big cryptocurrency play coming? Or are the walls caving in on the biggest of them all?
What a difference a month makes. The top 10 cryptocurrencies have all tanked in the last week, tracking Bitcoin's negative sentiment.
With China cracking down, India cracking down and big retailers that once accepted Bitcoin now turning away from it, gale force headwinds are blowing against the world's leading cryptocurrency.
