Tighter Chinese regulations prompt cryptocurrency crash
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The price of Bitcoin and other cryptocurrencies plummeted overnight as China announced tighter regulations on them.
While the crypto market has been booming since the start of the year, Bitcoin plunged to its lowest value since January, dragging other coins like Ethereum with it.
The falls followed a statement by Chinese financial industry groups banning institutions from offering cryptocurrency registration, trading, clearing, and settlement.
This came as another blow to the market just one week after Tesla-founder Elon Musk announced that his firm would stop accepting Bitcoin as payment for its vehicles over concerns about its huge carbon impact.
Stocks were also hit by the falls with the FTSE 100 seeing a 1.2 per cent drop yesterday alongside concerns about rising inflation.
While Beijing has taken steps before to block access domestically to cryptocurrency exchanges, Wednesday’s directive was broader.
It bans the use of cryptocurrencies in payment and settlement, and prohibits institutions from providing crypto-related products or exchange services between cryptocurrencies and the yuan or foreign currencies.
But prices have been recovering this morning, with Bitcoin trading above $40,000 (£29,000) following renewed support from Musk and prominent crypto backers such Ark Invest’s Cathie Wood.
“People consider this as a ‘buy the dip’ moment, and many consider this as ‘the last chance to buy bitcoin cheap’,” said Ruud Feltkamp, chief executive at crypto trading bot Cryptohopper. “The next few months will show if the bull market will continue or if it’s the start of the end of its run.”
Bitcoin previously hit precipitous highs in late 2017 before quickly collapsing in early 2018 where prices languished for a couple of years until renewed interest at the start of the pandemic.
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