Bitcoin plunges 12% after US probe and South Korean hack

Fears that the bitcoin bubble is about to burst intensified on Monday after the cryptocurrency tumbled below the $7000 (£5200) mark.

A double whammy of a probe into possible price manipulation of the digital currency in America and a hack of a South Korean cryptocurrency exchange pushed the price down $857, or 12%, to $6787.

US regulators asked several cryptocurrency exchanges for trading data as they try to determine if the prices could be manipulated in the futures market.

They had to step in after exchanges including Coinbase, Bitstamp, itBit and Kraken didn’t hand over enough information to Chicago’s exchange, CME, which launched bitcoin futures in December.

Bitcoin has lost more than half of its value this year, sliding by about two-thirds from a record high of nearly $20,000 in December. Other cryptocurrencies were affected including ethereum, the second-largest virtual currency, down 11%, as well as Ripple, which fell 10%.

In South Korea, an exchange, Coinrail, admitted that it was hit by a so-called cyberintrusion. It said that several “alt coins” — alternative versions of bitcoin — vanished in the attack. This prompted Coinrail to move the majority of its digital assets into a “cold wallet”, a safe storage that is not connected to the internet. It also said it was working with authorities to track down the lost assets, believed to be worth more than $40 million.

Demand for bitcoin in South Korea — an early adopter — has been so vast that regulators have recently had to intervene to ban the trade of futures contracts in order to stop aggressive buying. Traders have been prepared to pay a premium on what bitcoin is valued at on western exchanges.

Already this year a Japanese exchange, Coincheck, and a small Italian exchange, BitGrail, have been hit by cyber-attacks.