Bitcoin declined as much as 14% during US trading hours, falling just below US$4,700 before bouncing back slightly. The largest digital currency was holding steady around US$4,862 at 10.52am in Hong Kong.
Rival coins Ether and Litecoin were largely flat after both tumbled as much as 16% overnight.
On Friday, the SEC announced its first civil penalties against two cryptocurrency companies that didn’t register their initial coin offerings as securities.
Airfox and Paragon Coin Inc will each have to pay US$250,000 in penalties to compensate investors, and will also have to register their digital tokens as securities.
“The selloff is related to enforcement, which is almost certainly underway,” said Justin Litchfield, chief technology officer at ProChain Capital. “Projects are being made to return investor money, which, after having spent a ton of money marketing their US$100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough.”
Speculation that the sell-off was triggered by the SEC ruling may be overblown. Many of the ICOs done have already drained their wallets and likely converted their cryptocurrency into fiat, according to researcher Elementus.
Volatility has returned to cryptocurrencies, with the largest tokens shedding billions in market value since the hard fork of Bitcoin Cash debuted last week.
That came as two software-development factions failed to agree on a way to upgrade the offshoot of the original Bitcoin, leading to a computing power arms race.
Read about how the Bitcoin Cash clash is costing investors billions
The cryptocurrency industry has now lost more than US$670 billion in value from a January peak, according to data from CoinMarketCap.com.
Bitcoin is down more than 70% from its December 2017 high, the data show.
Thomas J. Lee, managing partner at Fundstrat Global Advisors and a long-time crypto bull slashed his year-end price target for Bitcoin to US$15,000 from US$25,000.
The target is based on a fair value multiple of 2.2 times the breakeven cost of mining, which the firm pegs at US$7,000, according to a report last week.
Bitcoin bulls may be able to take heart in some technical measures.
Based on the GTI Global Strength Indicator, Bitcoin is flashing oversold for the first time since August, and its most oversold level this year.
In addition, it is testing its 23.6% five-year look back Fibonacci level of US$4,727 as its next support.
“It’s always suspect guessing the cause of short-term price movements, but it seems likely that a lot of what’s going on now is ICOs trying to liquidate all their cryptocurrency for cash to make off with the goods before the SEC comes down on them,” said Bram Cohen, co-founder of the proposed digital currency Chia, which is planning an initial public offering.