Bitcoin crashes after China bans banks from using virtual currency @mariatad Thursday 5 December 2013 13:12 GMT The online currency Bitcoin plummeted more than 20 per cent today after Chinese regulators banned financial institutions from using it.The value of the virtual currency declined from $1,240 to $870 on the Bitcoin trading exchange Mt.Gox.Chinese regulators said Bitcoin does not possess the attributes of a currency and cannot be allowed to circulate as such.It also added that, while individuals are free to use it, it is at their own risk.Former US Federal Reserve chairman Alan Greenspan and current chairman Ben Bernanke have also warned of the risks of Bitcoin.Greenspan went as far as describing it as a "bubble" with no "intrinsic value" in a television interview.He also said there is no certainty of "where the money comes from".While Bernanke highlighted that virtual currencies could lead to a "more secure and more efficient payment system", he also warned that the Fed does not have the authority to supervise or regulate the use of Bitcoin-like currencies, which have come under fire over allegations of money laundering and illicit payments.The value of Bitcoin has soared in recent months, hitting the $1,200 mark, as enthusiasm for the virtual currency grows on prospects that it could become a legitimate form of payment in the near future.Watch Greenspan in the video below: More about: Alan Greenspan Banking Ben Bernanke Federal Reserve Foreign Exchange Reuse content

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this morning, the price of bitcoin began to free fall on comments from the People's Bank of with regard to "virtual capital controls."The average price paid for bitcoin, as reported by Bitcoin Wisdom, in China has fallen by over 20 percent in the last eight hours alone.The average bitcoin price in the United States is currently down close to 13 percent, near $990.The Bitcoin price crash in Canada, Europe, and Russia sees the cryptocurrency down near 12 percent in each country and region.Beginning on December 20, the price of bitcoin began an almost parabolic move up, gaining close to 50 percent, before peaking early this morning.The sharp rally in price has been attributed to a flight of capital from China, with Chinese citizens scrambling to move funds offshore, away from the yuan, which has seen its value steadily eroded with devaluations by the Chinese government.Chinese citizens moving funds out of the yuan, into bitcoin, is thought to have further exacerbated the yuan's slide, until today.

Rise in Chinese yuan seen causing bitcoin crash The yuan rose today versus other currencies.The shift, combined with a thinly traded market for bitcoin, has been said to be the reason behind the downdraft.Bitcoin and the yuan are both regularly subject to periods of volatility."It is absolutely tied to China.If the yuan goes up, bitcoin goes down," CEO of CCO Global, Dan Collins, was quoted by CNBC.Peter Smith, CEO of Blockchain, expressed a belief that the price will stabilize between $850 and $1,000.Perhaps hedging his view, Smith added: "but we'll see."Cryptocurrency with history of volatility From December 2013 to January 2015, bitcoin prices began a long slide from a high of near $1,175 to a low near $210, a crash of close to 80 percent.Zero Hedge reported that it had "warned" readers about chasing the recent bitcoin price spike: cautioning against buying more at higher prices based solely on "momentum."Bitcoin was first unveiled to the world on October 31, 2008, the work of a mysterious person or group known as Satoshi Nakamoto.

In 2010, bitcoin could be purchased for under $1 each.In 2014, Mark Williams, with the Finance Department at Boston University, produced a report stating that the volatility of bitcoin was 18 times that of the U.S.dollar, seven times that of gold, and eight times that of the stock market, as measured by the Standard & Poor's 500 Index.China's ban on its financial institutions handling bitcoin causes world's largest exchange to cease trading, halving the value of the currency from $1,000 to less than $500 in a matter of days.The country's central bank took a hard line on bitcoin in early December when it banned financial institutions from handling the decentralised crypto-currency, and as a result BTC China, the world's largest bitcoin exchange, has stopped accepting deposits from its users.This action caused the value of bitcoin to plummet around the world, with Tokyo-based exchange Mt Gox seeing the currency fall as low as $480 (£294), from a record high of $1,200 at the start of December.Speaking to Bloomberg Businessweek, BTC China chief executive Bobby Lee said: "We've suspended customer deposits.

It is unfortunate but we apologise for that inconvenience.We think this is due to government regulation.We have to play by the rules of the government of China.It is what it is."Bitcoin'ssurge in value from $100 to $1,200 in just four months was believed to be a result of substantial Chinese investment in the currency, but, as was seen during a similar boom and bust in April, the currency is extremely volatile and is not backed up by any central bank.BTC China was forced to block deposits after a number of third party payment providers - such as YeePay and TenPay - gave notice that they could no longer provide their services to the exchange, in compliance with the central bank's actions.The People's Bank of China issued a statement saying bitcoin is not a currency and therefore banks and other financial services are forbidden from dealing with it.Withdrawals of funds from BTC China remain unaffected, but with no money going in this leaves the exchange in a precarious situation, worsened by bitcoin's falling value encouraging investors to cash in, for fear of the currency's value not recovering.Analysts urged investors to remain calm, claiming the real value in bitcoin will be its widespread use and acceptance in less restrictive countries.Jaron Lukasiewicz, CEO of New York-based bitcoin exchange Coinsetter told CoinDesk: "This development will have a negative influence on bitcoin's near-term price potential, but I would encourage investors to remember that speculation doesn't drive reliable value in general."Bitcoin's