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Bitcoin tumbles as China cracks down on mining

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Bitcoin tumbled on Monday to a two-week low on China’s expanding crackdown on bitcoin mining, as investors grew more uncertain about the future of the leading cryptocurrency.

Bitcoin fell as low as $31,333, a two-week trough, dragging down other cryptocurrencies. It was last down 10.7 per cent, its largest daily percentage loss in a month.

The world’s biggest cryptocurrency has lost more than 20 per cent in the last six days alone and was at half its April peak of almost $65,000. Year to date, it remained up about 11 per cent.

Read more: Why the COVID-19 pandemic highlights Canada’s need for a digital currency

Some bitcoin investors were concerned further losses could be in store due to a chart formation known as a death cross which occurs when a short-term average trendline crosses below a long-term average trendline.

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China has been tightening its crackdown on cryptocurrencies. On Friday, authorities in the southwest province of Sichuan ordered bitcoin mining projects to close.

Last month the State Council, China’s cabinet, vowed to clamp down on mining and trading as part of a campaign to control financial risks.

On Monday, China’s central bank said it recently summoned some banks and payment firms, including China Construction Bank and Alipay, urging them to crack down harder on cryptocurrency trading.

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“People still react strongly to actions from China that create uncertainty so this is likely to reflect negatively on the bitcoin price,” said Ruud Feltkamp, chief executive officer at at crypto trading bot Cryptohopper.

“China is rolling its own cryptocurrency and has every incentive to have as little competition as possible…I think we will see miners leaving China and relocate where there is spare or cheap energy.”

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Data on mining is scarce. Yet bitcoin in China accounted last year for about 65% of global production, according to data from the University of Cambridge, with Sichuan its second-biggest producer.

Agricultural Bank of China (AgBank), China’s third-largest lender by assets, said separately it was following the People’s Bank of China’s guidance and would conduct due diligence on clients to root out illegal activities involving crypto mining and transactions.

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Alipay, the ubiquitous payment platform owned by fintech giant Ant Group, said in a separate statement it would set up a regulator monitoring system targeting key websites and accounts to detect illegal crypto-related transactions.

In other cryptocurrencies, ether, the token used for the Ethereum blockchain, dropped to a five-week low of $1,890. It was last down 14.3 per cent at $1,922.05.

Also on Monday, auction house Sotheby’s announced that a rare pear-shaped diamond that is expected to fetch up to $15 million can be bought at an auction next month using cryptocurrencies. It would be the first time a diamond of such size has been offered for public purchase with cryptocurrency.

(Reporting by Tom Wilson in London and Kevin Buckland in Tokyo; Editing by Toby Chopra, Giles Elgood and Alison Williams)

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