Bitcoin and its peers tumbled on Friday as a sell-off in speculative assets picked up steam and after Russia’s central bank proposed to ban all cryptocurrency operations in the country.
The price of bitcoin dropped by as much as 7.4 per cent against the dollar during Asian trading on Friday to $38,261. Other major cryptocurrencies tumbled as well, with ether down almost 9 per cent.
The falls for some of the world’s largest cryptocurrencies wiped about $140bn off their combined market capitalisation, according to figures from CoinMarketCap.
The cryptocurrency rout comes as investors have dumped shares in tech companies, pushing the Nasdaq into correction territory on Thursday on expectations the US Federal Reserve will move to rein in loose pandemic monetary policy to combat inflation.
The selling in bitcoin began accelerating late in the New York trading day on Thursday after video streaming giant Netflix warned on subscriber growth. Shares in the company fell around 20 per cent in pre-market trading on the Nasdaq on Friday.
Andrew Sullivan, managing director at Outset Global in Hong Kong, said Asia was seeing “huge volumes going through in a number of markets as investors move to cash” on Friday, as technology shares in the region followed Wall Street lower.
The sharp sell-off in digital assets also came a day after the Russian central bank announced draft proposals seeking to ban all cryptocurrency trading and mining. The proposed regulations would also block cryptocurrency investment by banks and forbid any exchange of cryptocurrency for traditional currencies in Russia, one of the world’s largest centres for crypto mining.
The central bank said in its 36-page report that the rapidly rising value of cryptocurrencies “is defined primarily by speculative demand for future growth, which creates bubbles,” adding they “also have aspects of financial pyramids, because their price growth is largely supported by demand from new entrants to the market.”
The announcement initially had little impact on bitcoin, which rose as much as 3.7 per cent against the dollar on Thursday. But by Friday afternoon in Asia the cryptocurrency had dropped more than 10 per cent from the previous day’s high to hit its lowest level since August.
“The Russian regulators have been frustrated [with the cryptocurrency industry] for several years and none of their warnings have been heeded,” said Vince Turcotte, Asia Pacific sales director at Eventus Systems.
He added that while the Russian proposal was “relatively harsher,” it was only the latest in a slew of announcements on cryptocurrencies by regulators across the globe focused mainly on protecting retail investors.
Turcotte likened the situation in Russia to that of China before Beijing began a more forceful crackdown on the industry. “Nobody listened to [Chinese officials] until they actually brought the hammer down,” he said. Last year, China declared that all crypto activities were illegal.
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