Bitcoin Fights Back After Sunday Sell-Off

May 24, 2021 Updated: May 24, 2021

LONDON/SINGAPORE—Cryptocurrencies fought back on Monday, clawing back ground after a bout of weekend selling fuelled by further signs of a gathering Chinese crackdown on the emerging sector.

Bitcoin climbed as high as $37,391 after falling some 7.5 percent a day earlier, and was last up 5 percent.

Second-largest cryptocurrency ether jumped more than 10 percent to as high as $2,321, erasing losses of 8.6 percent on Sunday that pushed it to near a two-month low around $1,730.

The catalyst for the slump was cryptocurrency “miners”, who mint cryptocurrencies by using powerful computers to solve complex maths puzzles, halting Chinese operations in the face of increasing scrutiny from authorities.

The attention on Chinese miners—who account for some 70 percent of supply—is the latest front in a wider push by Beijing against the cryptocurrency sector.

Major cryptocurrency exchange Huobi on Monday suspended both crypto-mining and some trading services to new clients from mainland China, adding it would instead focus on overseas businesses. Others also suspended business in China.

In the short-term, market players said, that is likely to lead to pressure on prices as miners sell bitcoin held on their balance sheets.

“If they are pulling up stakes or shutting down, they may need to reduce their balance sheets in the short term,” said James Quinn, managing partner at Q9 Capital, a Hong Kong-based cryptocurrency private wealth manager.

‘Tough Spot’

Crypto market players said fears over the China crackdown would likely linger.

“We tend to expect some stabilisation over the next week, which should translate into a bounce, but nobody’s really sure about what happens next,” said Joseph Edwards, head of research at crypto brokerage Enigma Securities.

“Crypto clearly finds itself in a tough spot in terms of the narrative right now, and it’s taken a lot of oxygen out of the room.”

Bitcoin had stabilised from a bruising week on Saturday after Tesla boss Elon Musk—whose comments on cryptocurrencies have been a key price driver in recent months—tweeted support for crypto in “the true battle” with fiat currencies.

SpaceX Falcon-9 Rocket And Crew Dragon Capsule Launches From Cape Canaveral Sending Astronauts To The International Space Station
Elon Musk, founder and CEO of SpaceX, participates in a press conference at the Kennedy Space Center in Cape Canaveral, Fla., on May 27, 2020. (Saul Martinez/Getty Images)

Yet after last week’s 25 percent drop, triggered in part by toughening language from Chinese regulators, bitcoin remains almost 45 percent below last month’s record high of $64,895.

Its slump has pulled bitcoin roughly back to its level before Tesla unveiled in February a $1.5 billion bitcoin purchase and made a since-reversed decision to accept it as payment.

Ether has fallen by half in just 12 days since its peak of $4,380, with other smaller cryptocurrencies such as dogecoin also suffering heavy declines.

By Tom Wilson and Tom Westbrook