Posted by Chuck Reynolds on February 09, 2017 - 5:02pmEdited 2/9 at 5:04pm

Bitcoin Price Sinks Below $1,000
as Exchanges Cut Services

Bitcoin's price has fallen sharply, dropping below $1,000 amid news from China that major exchanges had temporarily cut services. At press time, prices were down more than 7% after word emerged this morning that two of China’s biggest bitcoin exchanges – Beijing-based OKCoin and Huobi – are freezing bitcoin and litecoin withdrawals for a month following pressure from the People's Bank of China. Yuan deposits and withdrawals are not affected, the exchanges said.

Markets had been hovering around $1,063 when the news broke, though this has now changed as the market seeks to price in the news. According to the CoinDesk USD Bitcoin Price Index (BPI), prices fell as much as $80, hitting a low of $958.56. BPI data shows that prices had previously hit a high of $1,077.76 earlier today.

At press time, bitcoin prices are at an average of $988. CNY-denominated markets were down more than 13% from their peak on the news at one point, according to the BPI, falling from a high of ¥7,598.92 to an average of ¥6,755.52. However, the price was up 5% on the day at press time, indicating traders were perhaps viewing the news as a buying opportunity.

Real-time response

So far, market observers appear to be reacting with a mixture of surprise and concern when reached for comment. OTC trader Zhao Dong indicated that he expected further price weakening stoked by traders "since you can only deposit coins and sell" in light of the exchange policy changes.

Kong Gao, overseas marketing director at OTC trading firm Richfund, remarked more simply, stating:

"This is big news."

Two of China's Biggest Exchanges
Stop Bitcoin Withdrawals

In public posts that showcase the increasingly coordinated nature of exchange policy in the region, both OKCoin and Huobi said today that the move was a bid to bolster their anti-money laundering (AML) capabilities and prevent "illegal transactions".Both OKCoin and Huobi indicated that their platforms would now go through an “upgrade” to combat “money laundering, exchange, pyramid schemes and other illegal activities”, though no further details were provided.

BTCC, the other ‘Big Three’ domestic exchange, did not issue the update. All told, the move comes amid a rocky period for local exchanges that began with the wider scrutiny of major bitcoin exchanges by the People's Bank of China (PBOC), the country's central bank. Earlier today, China's central bank issued a warning to domestic exchanges, going so far as to state it would move to shutter startups that violated its guidance through the necessary government channels.

In statements provided to CoinDesk, Huobi indicated that the move was a proactive one that found the two exchanges seeking to "promote bitcoin industry self-discipline".

Chuck Reynolds
Contributor