Bitcoin Price Slumps in Wake of China Cryptocurrency Mining Crackdown

Bitcoin tumbled as much as 9 percent on Monday as recent volatility in the cryptocurrency market showed no signs of dampening down, with market players citing thin liquidity and China's expanding crackdown on bitcoin mining.

Bitcoin fell as low as $32,288 (roughly Rs. 23.9 lakhs), its lowest in 12 days, and was last down 7.5 percent. If sustained, the drop would be its biggest in around a month.

Authorities in the southwest province of Sichuan on Friday ordered cryptocurrency mining projects to close. 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. Some miners shift production there in the rainy summer to take advantage of its rich hydropower resources. Bitcoin price in India stood at 24.3 lakhs as of  02:30pm IST on June 21.

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 (roughly Rs. 48 lakhs). Still, it has gained over 10 percent this year.

Smaller rival Ether, the second-biggest cryptocurrency by market capitalisation that tends to move in tandem with Bitcoin, dropped as much as 12 percent, falling below $2,000  (roughly Rs. 1.4 lakhs) for the first time in almost a month. It was last down 10 percent at $2025.31 (roughly Rs. 1.5 lakhs). Ether price in India stood at Rs. 1.5 lakhs as of 3pm IST on June 21.

© Thomson Reuters 2021