Bitcoin rebound loses steam on rising regulatory concerns By Reuters

Bitcoin rebound loses steam on rising regulatory concerns By Reuters


© Reuters. Representations of the virtual currency Bitcoin stand on a motherboard in this picture illustration taken May 20, 2021. REUTERS/Dado Ruvic/Illustration

By Thyagaraju Adinarayan

LONDON (Reuters) – Beset by rising regulatory pressure, bitcoin hovered around $40,000 on Friday, pausing its attempt to recover from this week’s massive plunge.

was little changed on the day at $40,256 on the Bitstamp exchange. That is roughly 30% above its Wednesday low, but below its 200-day moving average. Rival cryptocurrency ether also came under pressure, falling 1% to $2,745.

The U.S. Treasury Department on Thursday called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability.

Those warnings came after Chinese financial industry bodies banned the use of cryptocurrencies in payment and settlement earlier in the week.

“Nerves remained heightened, and I cannot see liquidity being deeper on Saturdays and Sundays than Monday to Friday, especially after the last week,” said Jeffrey Halley, senior market analyst at OANDA.

“Weekend headline risk could prompt another bout of extended wealth destruction for the weekend warriors.”

Bitcoin markets operate 24/7, setting the stage for price swings at unpredictable hours, with retail and day traders driving those moves.

The offloading in crypto world has coincided with a surge in gold, which has hit 4-1/2 month highs and is on track for three straight weeks of gains, rising 1.8% so far this week.

A narrative of bitcoin becoming “digital gold” had gained traction earlier this year, with JPMorgan (NYSE:) saying in January that bitcoin emerged as a rival to gold.

But Societe Generale (OTC:) questioned the comparison on Thursday: “Bitcoin has clearly ‘outshone’ gold both to the upside and now also to the downside. But with such a gap in volatility and amplitude, does it make sense to compare the two assets at all?”

Ether is down 24% for the week and bitcoin down 15%.

The selloff also spilled over into equity markets on Wednesday, more so in companies with high exposure to cryptocurrencies, such as Coinbase. Coinbase is down 10% this week.

“For assets like crypto and equities the underlying common denominator is very loose central bank policies around the world and that combined with an exuberance for risk taking has filtered into crypto markets,” said Edward J. Perkin, chief equity investment officer at Eaton Vance (NYSE:).

Graphic: Bitcoin’s bounce after massive selloff – https://fingfx.thomsonreuters.com/gfx/buzz/yxmpjmwbmvr/Pasted%20image%201621588458077.png

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