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Bitcoin drops 9%, now back below $8,000

  • Bitcoin fell roughly 9 percent Wednesday to its lowest level since mid April, extending a sell-off that started after a week of major blockchain conferences in New York City.

  • Some pundits blamed a crackdown by state regulators this week as a key driver of Wednesday's sell-off across all the major cryptocurrencies.

  • "That has people a little concerned, and is a short-term hit to sentiment," says Brian Kelly, founder and CEO of BKCM.

Bitcoin extended a two-week sell off Wednesday, falling below $8,000 to its lowest level since mid April.

The digital currency dropped 8.7 percent to a low of $7,512.43 as of 12:30 p.m. ET, according to data from CoinDesk.

All other major cryptocurrencies were also in the red despite bullish calls that prices would skyrocket after a week of major blockchain events in New York City.

Analysts at Fundstrat predicted bitcoin would rally as much as 69 percent as a result of "Blockchain Week," yet the cryptocurrency has fallen about 13 percent since those conferences kicked off.

Some pundits pointed to regulatory news as the key driver of this week's sell-off.

On Monday, regulators in the U.S. and Canada announced a widespread crackdown on some cryptocurrency investment schemes, led by the North American Securities Administrators Association. More than 40 state and provincial watchdogs are participating in what's being called "Operation Crypto-Sweep," which has triggered at least 70 investigations so far.

"This cleaned out a lot of the bad projects," said Brian Kelly, founder and CEO of BKCM, an investment firm focused on digital currencies. "That has people a little concerned, and is a short-term hit to sentiment."

Long-term though, Kelly said it's part of the maturation this market needs for institutional investors to buy in.

"The projects that they shut down they appear to be junk, they had a real reason to shut them down," Kelly said.

Unlike stock markets, the nascent cryptocurrency market typically takes a few days to digest news before it triggers a sell-off, Kelly said.

This week's crackdown comes amid growing attention in the U.S. to cryptocurrency scams by U.S. regulators. The Securities and Exchange Commission has brought several fraud cases against operators of initial coin offerings and last week launched a website to help investors recognize scams.

Bitcoin has lost nearly 40 percent of its value this year, after an epic 1,300 percent rise to near $20,000 in 2017.

The top ten cryptocurrencies by market capitalization also sold off significantly Wednesday. Ethereum dropped 13 percent, XRP was down 11 percent and bitcoin cash fell 14 percent.

Jack Tatar, co-author of "Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond," said this sell-off could be a sign that a shakeout is coming for digital currencies.

"I think you're going to start to see some consolidation around many of the smaller cryptoassets," Tatar said. "That may not be a bad thing for the overall crypto community as I'm seeing more critical examination of altcoins, their utility and overall value."

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