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Bitcoin plunges 8% over growing crackdown in China

SAN FRANCISCO: Bitcoin’s value plunged today (Friday) to its lowest this week, taking losses after China started a new crackdown on the cryptocurrency that concerns almost 40 percent so far this month.

Making matters worse, Chinese authorities said cryptocurrencies would not be allowed in transactions and warned investors against speculative trading in them, despite the country powering most of the world’s mining.

cryptocurrency extended earlier losses, falling as much as 8.2pc to $35,339 as it stayed pinned in this week’s relatively tight trading range. It was last down 6.2pc.

“Bitcoin is presently in a tad of snooze mode trading in the collection of $34,000 and $40,000,” said Ulrik Lykke, executive director at crypto hedge fund ARK36.

Ulrik Lykke  said, “Several traders are recognizing  that price seems to be range-bound for the moment, why they may be hesitant to take a position with high conviction.”

The cryptocurrency has lost 37pc in May, which if sustained would be its worst monthly performance since September 2011. Its drop was triggered by China’s efforts to crack down on mining and trading of cryptocurrencies, and Tesla’s move to halt payments over worries about energy use.

Trading in cryptocurrencies has been banned in China since 2019 to prevent money laundering, as leaders try to stop people from shifting cash overseas. The country had been home to around 90 percent of the global trade in the sector.

READ MORE: Bitcoin hits $1 trillion market value to all-time peak

In a statement, three state-backed industry associations said “cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded.”

The price fluctuations “seriously violate people’s asset safety and disrupt normal economic and financial order,” said the statement posted to social media by the People’s Bank of China.

The notice warned consumers against wild speculation, adding that the “losses caused by investment transactions are borne by the consumers themselves,” since Chinese law offers no protection to them. It reiterated that providing cryptocurrency services to customers and crypto-based financial products was illegal for Chinese financial institutions and payment providers.

Bitcoin had a roller-coaster day on Wednesday, falling from $45,600 to under $40,000, then climbing back before dropping to $30,017 and up again.

Last week Tesla hit the brakes on letting people pay for its electric cars with bitcoin, citing concerns about the harmful effects that mining cryptocurrencies have on the environment.

READ MORE: Bitcoin tops $50,000 as it gains mainstream acceptance

Then Musk appeared to suggest Tesla was planning to sell its huge holdings of the unit, before clarifying that the company had not sold any bitcoin.

Mining cryptocurrency is a hugely energy-intensive process requiring large amounts of electricity in giant data centers. China, which powers nearly 80 percent of the global cryptocurrency trade, relies on a particularly polluting type of coal, lignite, to power some of its mining.

“If bitcoin was a country, it would use around the same amount of electricity a year to mine as Switzerland does in total,” Deutsche Bank analysts said in a note.

China is in the midst of a wide-ranging regulatory crackdown on its fintech sector. Its biggest players including Alibaba and Tencent have been hit with big fines after being found guilty of monopolistic practices.