Crypto traders say Beijing’s closure orders have forced mine owners to dump their currency onto an oversensitive market depressing prices
Bitcoin was heading for its biggest drop in a month on Monday with China’s continued crackdown on crypto mining taking much of the blame.
The dominant cryptocurrency tumbled as much as 9% as recent volatility in the market showed no signs of disappearing, with market players also pointing to thin liquidity as the cause of the plunge.
Bitcoin fell as low as $32,288, its lowest in 12 days, and was last down 7.5%. If sustained, the drop would be its biggest in around a month.
Authorities in the south-west Chinese province of Sichuan ordered cryptocurrency mining projects to close on Friday. The State Council, China’s cabinet, last month vowed to clamp down on bitcoin mining and trading as part of a series of measures to control financial risks.
“Crackdown on Chinese miners might mean that they are offloading coin into a thin market and taking us lower,” said Ben Sebley of London-based crypto firm BCB Group.
Production of bitcoin in China accounts for more than half of global bitcoin production. Sichuan is China’s second-biggest bitcoin mining province, according to data compiled by the University of Cambridge. Chinese mines power nearly 80% of the global trade in cryptocurrencies despite a domestic trading ban since 2017.
Authorities in the province of Sichuan ordered the closure of 26 mines last week, according to a notice widely circulated on Chinese social media and confirmed by a former bitcoin miner.
China is in the midst of a wide-ranging regulatory crackdown on its fintech sector, whose biggest players – including Alibaba and Tencent – have been hit with big fines after being found guilty of monopolistic practices.
Beijing has turned the screw on cryptocurrency miners to stamp out financial risks from speculation, although environmental concerns about the gas-guzzling mines is also a factor.
Companies that mine bitcoin typically hold large inventories of the cryptocurrency, with any moves to sell large amounts depressing prices.
Bitcoin has dropped by over a fifth in the last six days, and is down by half from its April peak of just shy of $65,000. Still, it has gained over 10% this year.
Smaller rival ethereum, the second-biggest cryptocurrency by market capitalisation that tends to move in tandem with bitcoin, dropped as much as 12%, falling below $2,000 for the first time in almost a month. It was last down 10% at $2025.31.
- With reporting by Reuters and AFP