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The value of bitcoin collapsed below $3,000 (£2,200) at one point on Friday after Chinese authorities announced a crackdown on the digital currency.

Bitcoin is the first, and the biggest, "cryptocurrency" – a decentralised tradable digital asset. Whether it's a bad investment is the $70bn question (literally, since that's the current value of all bitcoins in existence). Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it's hard (but not impossible) to trace a bitcoin transaction back to a physical person.

The virtual currency, which emerged in the aftermath of the 2008 financial crisis, fell as low as $2,972 on Friday – a drop of 40% from a high of $5,000 earlier this month - before recovering to about $3,600 in the afternoon.

The drop came after Beijing ordered cryptocurrency exchanges to stop trading and block new registrations, due to fears that increasing number of consumers piling into the market could prompt wider financial problems.

“All trading exchanges must by midnight of 15 September publish a notice to make clear when they will stop all cryptocurrency trading and announce a stop to new user registrations,” the government notice said, according to Chinese state newspaper Securities Times.

BTCChina, one of the biggest Chinese exchanges, said on Thursday it would stop all trading by 30 September. It was followed by a series of other exchanges, including OkCoin and Huobi, announcing closures on Friday.

China accounts for almost a quarter of bitcoin trades and is also home to many of the world’s biggest bitcoin ...

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