NEW YORK: Cryptocurrencies rebounded on Monday, reclaiming ground lost during a bout of weekend selling that was fuelled by further signs of a Chinese crackdown on the emerging sector.
Bitcoin was last up 8.8% to $37,766, erasing losses of 7.5% from a day earlier but still down by more than 40% from last month’s record high.
Second-largest cryptocurrency ether jumped more than 17% to as high as $2,459 after slumping more than 8% on Sunday to near a two-month low. Yet it too has fallen by almost half from a peak hit earlier this month.
In the past week policymakers have stepped up their response to the popularity, and volatility, of cryptocurrencies. On Monday Federal Reserve Governor Lael Brainard told a virtual conference organized by CoinDesk that the growth in “private money,” digital payments and steps by other central banks were sharpening the focus on Central Bank Digital Currencies (CBDC.)
While her comments did not cause much of price move, she did say that the wide use of private money poses consumer and stability risks given possible “run-like behavior.”
The catalyst for the Sunday slump was cryptocurrency “miners” - who mint cryptocurrencies by using powerful computers to solve complex maths puzzles - halting Chinese operations in the face of increasing scrutiny from authorities.
The attention on miners in China - who account for some 70% of supply - is the latest front in a wider push by Beijing against the cryptocurrency sector.
Major cryptocurrency exchange Huobi on Monday suspended both crypto-mining and some trading services to new clients from mainland China, adding it would instead focus on overseas businesses. Others also suspended business in China.
In the short-term, market players said, that is likely to lead to pressure on prices as miners sell bitcoin held on their balance sheets.
“If they are pulling up stakes or shutting down, they may need to reduce their balance sheets in the short term,” said James Quinn, managing partner at Q9 Capital, a Hong Kong-based cryptocurrency private wealth manager.
Crypto market players said fears over the China crackdown would likely linger. “Nobody’s really sure about what happens next,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities. “Crypto clearly finds itself in a tough spot in terms of the narrative right now, and it’s taken a lot of oxygen out of the room.”
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