Bitcoin struggles to regain ground after plunging on China crackdown
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[June 22, 2021] By
Alun John, Andrew Galbraith and Tom Wilson
LONDON/HONG KONG (Reuters) -Bitcoin
strained on Tuesday to climb away from a two-week low touched a day
earlier when China's central bank reaffirmed a crackdown on
cryptocurrencies and restricted trading channels for Chinese residents.
The world's largest cryptocurrency gave up most of its earlier gains and
was last up 0.5% at $31,753. It tumbled over 10% on Monday, its largest
one-day drop in over a month.
The sell-off was sparked by the People's Bank of China (PBOC) urging
China's largest banks and payment firms to crack down harder on
cryptocurrency trading.
Crypto exchanges were effectively pushed out of China by a 2017 rule
change, but over-the-counter (OTC) platforms based overseas have sprung
up to receive payment from people based in China and buying
cryptocurrencies on their behalf.
"It basically says now OTC transactions are not legitimate ... we are
not allowed by the banks to transfer money for cryptocurrency purchases
and sales," said Bobby Lee, chief of cryptocurrency wallet app Ballet
and formerly CEO of BTC China, China's first bitcoin exchange.
After Monday's PBOC statement, banks including Agricultural Bank of
China and Ant Group's ubiquitous payment platform Alipay said they would
step up monitoring to root out crypto transactions.
Ether, the second-biggest cryptocurrency, was up a sliver at $1,980,
after hitting a five-week low the day before.
Last month, three industry associations issued a similar ban on
crypto-related financial services, though market players said it would
be hard to enforce as banks and payment firms could struggle to identify
crypto-related payments.
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A representation of the virtual cryptocurrency Bitcoin is seen in
this picture illustration taken June 14, 2021. REUTERS/Edgar
Su/Illustration
"We are definitely in the midst of a correction," said Anthony Wong of Hong
Kong-based crypto firm Orichal Partners.
"This time China's iron-fist ban on crypto seems to be more serious than back in
2017 as the directive came straight from the top."
HASH RATE DECLINE
Beijing has ratcheted up its campaign against cryptocurrencies in recent weeks,
with China's State Council, or cabinet, saying last month it would tighten
restrictions on bitcoin trading and mining.
Authorities in major bitcoin mining hubs including Sichuan, Xinjiang, and Inner
Mongolia have issued their own curbs with greater details on the restrictions.
As a result, the hashrate, which measures the processing power of the bitcoin
network and shows how much mining is taking place, on Monday hit its lowest
level since late 2020.
The mining crackdown will likely hit prices in the short-term, market players
said.
"Some of the miners in China may be more willing to sell their bitcoin now
versus when they are able to run their mining operations, because they have to
raise cash," said Seth Melamed, of Tokyo crypto exchange Liquid.
(Reporting by Tom Wilson in London, Alun John in Hong Kong and Andrew Galbraith
in Shanghai, additional reporting by Kevin Buckland In Tokyo; Editing by Stephen
Coates, Shri Navaratnam and Catherine Evans)
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