Bitcoin slumps in wake of China crackdown

Published June 21, 2021
Small toy figurines are seen on representations of the Bitcoin virtual currency displayed in front of an image of China's flag in this illustration picture. — Reuters/File
Small toy figurines are seen on representations of the Bitcoin virtual currency displayed in front of an image of China's flag in this illustration picture. — Reuters/File

Bitcoin tumbled as much as nine per cent on Monday as recent volatility in the cryptocurrency market showed no signs of dampening down, with market players citing thin liquidity and China's expanding crackdown on Bitcoin mining.

Bitcoin fell as low as $32,288, its lowest in 12 days, and was last down 7.5pc. If sustained, the drop would be its biggest in around a month.

Authorities in the southwest province of Sichuan on Friday ordered cryptocurrency mining projects to close. The State Council, China's cabinet, last month vowed to clamp down on Bitcoin mining and trading as part of a series of measures to control financial risks.

"Crackdown on Chinese miners might mean that they are offloading coin into a thin market and taking us lower," said Ben Sebley of London-based crypto firm BCB Group.

Production of Bitcoin in China accounts for more than half of global Bitcoin production. Sichuan is China's second-biggest Bitcoin mining province, according to data compiled by the University of Cambridge. Some miners shift production there in the rainy summer to take advantage of its rich hydropower resources.

Companies that mine Bitcoin typically hold large inventories of the cryptocurrency, with any moves to sell large amounts depressing prices.

Bitcoin has dropped by over a fifth in the last six days, and is down by half from its April peak of almost $65,000. Still, it has gained over 10pc this year.

Smaller rival Ether, the second-biggest cryptocurrency by market capitalisation that tends to move in tandem with Bitcoin, dropped as much as 12pc, falling below $2,000 for the first time in almost a month. It was last down 10pc at $2025.31.

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