The great crypto rout of May, 2021 continues with Bitcoin shedding 30% or $US12,000 to end around $US30,000 on Wednesday.
The slide came amid fears that Chinese regulators would intensify a crackdown on financial institutions using digital tokens.
Other digital coins endured even heavier selling, with ethereum, one of the largest cryptocurrencies, slumping heavily.
The main coin for the Ethereum blockchain network slumped below $US2,000 at one point, a more than 40% drop in less than 24 hours.
And it’s no coincidence that gold prices have jumped sharply as crypto currencies have found the going rough.
Comex front month gold prices are up more than $US100 an ounce since they closed at $US1,76o on April 30. Wednesday saw another small advance to around $US1,870.
Gold in fact rose as other commodity prices dipped, led by oil.
JPMorgan analysts say that based on futures contracts, traders are moving back to gold and away from cryptos.
CNBC attributed the slump to “at least a temporary reversal in broader acceptance for cryptocurrency, as well as regulatory concerns and weakness in more speculative areas of financial markets.”
The Chinese warning is part of the command-and-control approach to the economy and markets of the Communist party which fears any move that it cannot control. The crackdown on Jack Ma and his Ant financial group is a prime example of this paranoia.
Conflicting tweets from Tesla founder, Elon Musk, long a hero of the crypto hypers, hasn’t helped maintain sentiment and prices. if anything, his tweet and counter-tweet about Bitcoin and other cryptocurrencies has shattered the confidence of believers and owners.
The price of bitcoin is still up more than 200% since September, thanks to the dramatic rally sparked in part by hedge fund managers, banks and other companies appearing to embrace cryptocurrency and wanting to hop on for the ride.
Bitcoin and related assets have also come under increased scrutiny from regulators around the world as they have grown into a bigger part of the financial markets.
“We believe government crackdown on cryptocurrencies can trigger another ‘crypto winter’ and reduced trading activity. Harsher crackdown on crypto is possible in many developing countries which may view crypto as a threat to their fiat currencies and monetary system,” Bernstein’s Harshita Rawat said in a note Tuesday reported by CNBC.
And besides the control issue, China is being its usual duplicitous self when it comes to issues where it sees a conflict with its own ambitions.
China is developing its own government-run cryptocurrency and Tuesday’s reassertion of its rules against other digital currencies is an example of that conflict of interest. The Communist Party led government has banned financial companies from providing services for crypto trading (ie for rival cryptos).
That will change when China has its own crypto ready to go.
China is reportedly the biggest crypto miner in the world – the process is currently run through individuals and small companies. We can expect lots of stories about greedy traders and miners of Bitcoin and other non-Chinese cryptos when the Government-sponsored coin is ready to go.
The activities of the miners and traders in China were tolerated until the Communist Party decided it wants to control the whole process via its own crypto – and make money, of course.
