July 2, 2022
  • July 2, 2022

Bitcoin runs on fears of regulatory crackdown

By on May 19, 2021 0

Cryptocurrency markets have swung into chaotic trading and related stocks have been hit after Chinese regulators reported a crackdown on the use of digital currencies, the prices of which have skyrocketed this year.

Bitcoin fell 30% to $ 30,101, before reducing its losses to less than 8%.

Other digital coins were also hit by strong sales, with Ethereum, one of the top performing cryptocurrencies last month, losing a quarter of its value before moderating to around 16%. More than $ 8.6 billion in positions have been liquidated in the past 24 hours, according to data from bybt.com, a cryptocurrency data provider.

The sudden moves came after the People’s Bank of China warned financial institutions about accepting cryptocurrencies as a means of payment or offering related services and products, amplifying investor fears that regulators could tighten oversight of the coasting asset class.

Elon Musk, chief executive of Tesla and avid cryptocurrency enthusiast, last week reversed his intention to accept bitcoin as payment for Tesla cars for environmental reasons, also heightening concerns about the long-term future. term of the asset class.

In a tweet on Wednesday, Musk indicated that Tesla holds bitcoin for the long term and will not sell his position.

Cathie Wood, founder of Ark Invest, a fund manager who has invested heavily in cryptocurrency-related companies, also reiterated her support for bitcoin. “We go through tough times like this and scratch the models and, yes, our belief is just as high,” she told Bloomberg Television.

Market conditions were very volatile, with the price of bitcoin swinging in often wide ranges. Binance and Coinbase, two of the more well-known cryptocurrency exchanges, both encountered technical issues with their exchanges as users attempted to sell their holdings.

Other cryptocurrencies also fell, including the ‘joke’ dogecoin, which fell 40%.

US securities dependent on cryptocurrency trading and prices also fell early in trading, before recovering. Coinbase shares fell 12% to an all-time high and MicroStrategy, the software company turned Bitcoin investor, fell 15%.

Marathon Digital Holdings, the cryptocurrency miner, fell 13%. Galaxy Digital Holdings, the investment firm of entrepreneur Michael Novogratz, fell 12%.

Virtual currency “is not a real currency” and “should not and cannot be used as currency in the market,” the PBoC said in a statement Tuesday evening. He called a recent price spike “speculation”.

The development reflects China’s campaign to limit institutional activity in cryptocurrencies as it prepares to launch its own digital currency. Other markets like the United States have remained relatively open to institutional involvement.

“Part of this is because they have their own digital renminbi, the lack of control in terms of cash outflows, and part of trying to make sure people don’t get ripped off,” Paul Haswell said, partner of the law firm Pinsent. Masons in Hong Kong, repression of China.

China’s pressure on cryptocurrencies accelerated in 2017 when it shut down the country’s bitcoin exchanges, which previously accounted for the majority of global trade.

Government plans for a digital renminbi, which would provide the central bank with a record of all currency transactions in real time, could create a rival cashless payment mechanism to compete with Ant Group’s vast online fintech platforms and Tencent.

In the United States, regulators have made it easier for retail investors to purchase cryptocurrencies and allowed crypto exchanges to be listed on public markets.

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Major US financial institutions, such as Goldman Sachs and JPMorgan Chase, are considering offering digital currency investments to wealth management clients. But financial watchers have stressed the need to better protect consumers.

In its latest Financial Stability Review, the European Central Bank said bitcoin’s price volatility makes it risky, while pointing out its “exorbitant carbon footprint and potential use for illicit purposes.” However, the financial stability risks for euro area institutions were limited because they were little exposed, he added.

The price of bitcoin has climbed 300% in the past 12 months, despite its recent sell-off. The ECB noted that the surge in bitcoin prices eclipsed previous financial bubbles such as “tulip mania” and the South Sea bubble in the 17th and 18th centuries.

“I wouldn’t be surprised to see other regulators and policymakers do the same [as the Chinese restrictions] over the next few weeks, as they warn investors of the risks of speculative trading or volatility in the crypto market, ”said Henri Arslanian, global head of crypto at PwC.

“The reality is that we are seeing the continued entry of institutional players and institutional investors into this space and it is unlikely to slow down anytime soon.”

Additional reporting by Wang Xueqiao in Shanghai