Bitcoin experiences another weekend wobble

World's biggest cryptocurrency slumps by 11% towards $30,000 in Saturday trading

FILE PHOTO: Representation of the virtual currency Bitcoin is seen on a motherboard in this picture illustration taken April 24, 2020. REUTERS/Dado Ruvic /Illustration/File Photo
Powered by automated translation

Bitcoin experienced another weekend wobble on Saturday, as the world's biggest cryptocurrency plunged more than 11 per cent.

The market capitalisation of the world's biggest cryptocurrency, which had soared above $1 trillion in April, fell below $600 billion as the Bitcoin price dropped to $30,411.75 at 12.59pm UAE time on the Luxembourg-based Bitstamp exchange.

Most other cryptocurrencies witnessed similar declines, with Ether also dropping more than 10 per cent to $1,733.98.

On Friday, reports emerged of the disappearance of billions of dollars worth of Bitcoin from Africrypt, a South African-based cryptocurrency-based investment firm.

A law firm representing the company's investors said about 69,000 ($3.6bn) of Bitcoin had gone missing, alongside Ameer and Raees Cajee, the founders of the company.

Hanekom Attorneys said the brothers running the company had written to clients on April 13 saying that their systems had been hacked, and that client accounts and client wallets had been "compromised". The letter also said Africrypt had halted operations.

Cape Town-based law firm Hanekom Attorneys said the brothers had vanished. It has been employed by investors and has reported the case to the police.

"We were immediately suspicious as the announcement implored investors not to take legal action," the firm told Bloomberg. "Africrypt employees lost access to the back-end platforms seven days before the alleged hack."

However, in a separate statement to media on Friday, a lawyer for the brothers said they "categorically denied" they had absconded with the funds.

"They maintain that it was a hack, and they were fleeced of these assets," lawyer John Oosthuizen told the BBC.

In a statement issued on Thursday, South Africa's Financial Sector Conduct Authority said it was aware of concerns regarding Africrypt, but added cryptocurrencies are not currently regulated in the country "and consequently the FSCA is not in a position to take regulatory action".

"The Authority has warned the public and continues to do so with respect to the high-risk nature of investing in crypto assets," the regulator said.

"Besides the underlying concerns around the suitability of crypto assets as an asset class for investment, due to the lack of an underlying business model and the risk of large fluctuations in the market price in most cases, the authority is concerned over the large number of scams being perpetrated by persons purporting to provide the crypto asset to the public."

The regulator said it is in the process of declaring cryptocurrencies to be a financial product in a bid to "protect the public".

If the coins prove to be unrecoverable, the losses incurred would be bigger than experienced in the cryptocurrency market during the whole of last year. Losses through fraud and crime in 2020 stood at $1.9 billion, down from $4.5bn in 2019, according to CipherTrace.

"Despite advancements in tracing technology and bolstered security at exchanges, it is still impossible to prevent outright scams from occurring, underlining the importance of due diligence for investors before getting involved," CipherTrace's chief marketing officer and chief financial analyst John Jefferies said in a note to clients on Saturday.