Bitcoin drops under $30,000 for first time in five months

By: AFP      Published: 08:34 PM, 22 Jun, 2021
Bitcoin drops under $30,000 for first time in five months

Bitcoin fell underneath $30,000 on Tuesday for the first time in five months, hit by concerns over China's ongoing crackdown on the world's most popular cryptocurrency.

At about 1230 GMT, bitcoin sank as low as $29,334, a level last seen in January, with analysts citing Chinese efforts to curb trading and mining operations.

The unit later stood at $29,590, down 9.25 percent in value.

"Concerns mount over China's ongoing clampdown and fears that widespread acceptance of bitcoin and other digital currencies will be delayed because of concerns about their environmental impact," said analyst Fawad Razaqzada at trading site ThinkMarkets.

Bitcoin also faces a green backlash because mining often uses electricity produced from fossil fuels, he noted. 

China has broadened a crackdown on its massive cryptocurrency mining industry with a ban on mines in the key southwestern province.

Chinese mines power nearly 80 percent of the global trade in cryptocurrencies despite a domestic trading ban since 2017, but in recent months several provinces have ordered mines to close as Beijing turns a sharp eye to the industry.

Authorities in the province of Sichuan ordered the closure of 26 mines last week, according to a notice widely circulated on Chinese social media and confirmed by a former bitcoin miner. 

Sichuan, a mountainous region in southwest China, is home to a large number of cryptocurrency mines -- huge data centres which require a colossal amount of energy.

Bitcoin and other cryptocurrencies are minted by solving puzzles using powerful computers that consume enormous amounts of electricity -- much of which is usually produced by coal plants.

US and European stocks rebound; bitcoin slumps

US and European stocks rallied Monday, staging a strong bounceback from last week's rout, while bitcoin sank on news of a Chinese crackdown on its massive cryptocurrency mining industry.

The Dow last week suffered its worst week since October 2020, dropping 3.4 percent, due in part to unease at the Federal Reserve's shift towards a more hawkish stance on monetary policy.

Investors were rattled last week when the Fed moved up its forecasts for raising interest rates, while still arguing that consumer price increases were transient.

But stocks rebounded Monday, led by financial, industrial and energy shares that had slid last week. 

"The market is correcting the overcorrection from last week," Maris Ogg of Tower Bridge Advisors said of Monday's session.

John Williams, head of the Federal Reserve Bank of New York, said at a gathering Monday that he still thinks higher prices are due "mostly" to factors connected with the reopening of the economy. These stresses should abate over time, but the Fed will continue to monitor incoming data, he said. 

Fed Chair Jerome Powell is due to appear before a congressional panel Tuesday.

The Dow finished up 1.8 percent at 33,876.97.

Earlier, London rose 0.6 percent on the day after UK supermarket group Morrisons rejected a takeover approach.

Frankfurt climbed 1.0 percent and Paris rose by 0.5 percent.

"Fears over an increasingly hawkish Fed appear to have been eased today, with markets throughout Europe and the US on the rise," said market analyst Joshua Mahony at online trading platform IG.

Bitcoin slumps 

Meanwhile, bitcoin slumped more than 10 percent at one point after China intensified a crackdown on trading and mining operations. 

The world's most popular digital currency later stood down about nine percent at $32,642.

Chinese mines power nearly 80 percent of the global trade in cryptocurrencies despite a domestic trading ban since 2017, but in recent months several provinces have ordered mines to close as Beijing turns a sharp eye to the industry.