Bitcoin held above $US11,000 a day after losing a quarter of its value as traders sought a floor for pricing amid growing concern regulators around the world will move ahead with new rules to restrict the burgeoning cryptocurrency industry.

The largest digital currency rose 4.7 per cent to $US11,190 at 10:35 am in Hong Kong, recovering some ground after slumping as much as 26 per cent on Tuesday, according to Bloomberg composite pricing.


Bitcoin dives on crackdown fear

Bitcoin dips to four-week low as fears grow about a possible regulatory crackdown on the cryptocurrency market.

Ripple added 10 per cent while Ethereum rose about 6 per cent as rival cryptocurrencies also rebounded modestly.

“Cryptocurrency holders are trying to decide whether to abandon Bitcoin,” Steven Englander, head of research and strategy with Rafiki Capital, said in a note to clients. “The dilemma is that once you stop pricing Bitcoin and its derivatives as new assets that will head to the moon, the pricing model is more conventional and much less breathtaking.”

Speculators across the globe are struggling to determine when or how market watchdogs may rein in an industry that’s decentralised and derives much of its value from anonymous ownership. Many assertions that digital coins represent a bubble have triggered double-digit selloffs over the past year, only to be followed by rebounds.

January’s cryptocurrency selloff got fresh impetus on Tuesday when Bitcoin slumped as the prospect of regulatory crackdowns appeared to spread.

The largest digital coin hit its lowest level since late December overnight, slumping below $US11,000, according to composite pricing on Bloomberg. At 9am, it was fetching around $US10,338, a fall of 24 per cent on the day. Rival cryptocurrencies also tumbled. Ripple sank as much as 33 per cent and Ethereum dropped 24 per cent, before both tokens pared some declines.

In South Korea, shutting down cryptocurrency exchanges is still an option, Finance Minister Kim Dong-yeon said in an interview with TBS radio. But measures first need “serious” discussion among ministries, Kim added, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was needed.

“The finance minister made it clear they’re definitely considering banning crypto trading — and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”

China, which first began targeting the industry last year, is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter.

“We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.

Lower-than-normal trading in Korea and Japan may have exaggerated the moves in Asia hours on Tuesday, said Mati Greenspan, senior market analyst for the eToro currency platform.

Bitcoin trading using the Korean won was about 3.3 per cent of the total among major currencies, compared with more than 10 per cent reached on several days over the past two weeks, according to cryptocompare.com data.

Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in Bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”

The ESMA warned retail investors against initial coin offerings in November and is monitoring developments in cryptocurrencies, Maijoor said.

Bloomberg

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