Bitcoin’s misfortunes spreading pain across the globe

When the mines are booming, sell picks and shovels. When the mines shut down…run for the hills.

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A bitcoin sits on a graph with red arrow going down

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The Bitcoin (CRYPTO: BTC) price is down 2.1% over the past 24 hours.

One Bitcoin is currently worth US$33,312 (AU$43,832), giving the world’s biggest cryptocurrency a market cap of US$624.3 billion.

That’s well off the US$1.2 trillion market cap when Bitcoin was trading at all-time highs of US$64,829 in mid-April. Since then, the token has lost 49% of its value.

Crypto mining machines tumble

The Bitcoin price may have fallen by half since April’s records, but the price of the virtual picks and shovels used to mine the token have tanked even more.

Bitmain Technologies is the world’s biggest producer of the machines used to mine Bitcoin. And Bitmain reported yesterday (overnight Australian time) that the prices for its top-of-the-line mining machines are down 75% since April.

As Bloomberg reports, Bitmain has now “suspended sales of machines for spot delivery globally, aiming to prop up local prices after crypto miners fleeing Beijing’s crackdown dumped used mining rigs on the market”.

As you may be aware, China is aiming to stamp out crypto mining within its borders. In addition, it is looking at banning its financial institutions from facilitating crypto transactions.

Bitmain did not say when it expected to resume selling its Bitcoin mining devices.

$4.7 billion of Bitcoin vanishes

Ameer and Raees Cajee are 2 brothers who founded South African-based cryptocurrency investment platform Africrypt. They now appear to have vanished along with their platform’s US$3.6 billon (AU$4.7 billion) worth of Bitcoin.

Ameer, the firm’s COO, told the platform’s customers that Africrypt had been hacked back in April. Some of his clients pursued the matter, hiring law firm Hanekom Attorneys.

Hanekom Attorneys said (quoted by Bloomberg): “We were immediately suspicious as the announcement implored investors not to take legal action. Africrypt employees lost access to the back-end platforms seven days before the alleged hack.”

The firm’s investigation found Africrypt’s pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers – or to other large pools of bitcoin – to make them essentially untraceable.

With Bitcoin and other cryptos already under the microscope by legislators across the globe, the alleged $4.7 billion theft will only up the pressure for greater regulation.

While that may be in the best interests of investors in the longer-term, it could put further downward pressure on the Bitcoin price in the mid-term.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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