Bitcoin struggles for footing on worries over China, leverage

TOKYO: Bitcoin regained some ground on Thursday from the previous session’s brutal slide to four-month lows but was weighed down by concerns over tighter regulation in China and unease over the extent of leveraged positions in the cryptocurrency world.

Bitcoin, the biggest and most popular cryptocurrency, rose 8.75% to touch $40,000, after plunging 14% on Wednesday to its lowest since late January.

Smaller rival ether was up 6.6% at $2,600 at 0630 GMT, but in extremely volatile trading after its 28% tumble on Wednesday.

Wednesday’s declines in both digital assets were their biggest daily percentage moves in more than a year as investors rushed to exit trades that until recently were heartily outperforming traditional markets such as stocks and bonds.

The latest catalyst was a statement by Chinese financial industry groups on Tuesday banning institutions from offering cryptocurrency registration, trading, clearing, and settlement.

But bitcoin had been under pressure for almost a week after a series of tweets from carmaker Tesla’s chief Elon Musk, a major cryptocurrency backer, chiefly his reversal on Tesla accepting bitcoin as payment.

While Beijing has taken steps before to block access domestically to cryptocurrency exchanges, its latest directive was broader.

It bans the use of cryptocurrencies in payment and settlement, and prohibits institutions from providing crypto-related products or exchange services between cryptocurrencies and the yuan or foreign currencies.

Chris Weston, head of research at brokerage Pepperstone in Melbourne, pointed to how $9.13 billion of cryptocurrency positions had been liquidated across exchanges over 24 hours, and $532 billion in total volume transacted.

“It’s too early to say if the rebound we’ve seen off the lows in crypto has legs, but as we roll into Asian trade, I question if we will get a chance to catch our breath or is there more volatility in store?” he said.

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