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Bitcoin drops below $40 000

Amid regulatory drumbeat, Fed risk.
Image: Christinne Muschi/Bloomberg

Bitcoin struggled for a third day, dropping briefly below $40 000 for the first time since August amid rising criticism from regulators and a general mood of caution in global markets.

The largest cryptocurrency was little changed at about $41 000 as of 8:34 a.m. in Hong Kong on Wednesday, having earlier slid as much as 3.2%. The performance of tokens including Ether, Solana and Litecoin was mixed over the past 24 hours.

Fears of contagion from the debt crisis at China Evergrande Group and expectations that the upcoming Federal Reserve meeting will signal a scaling back in asset purchases later this year are among the impediments for investors.

“Bitcoin needs to retake the 200-day moving average at $46 000 and consolidate before a collective sigh can be released,” said Antoni Trenchev, co-founder of crypto lender Nexo.

In a Tuesday discussion on cryptocurrencies, US Securities and Exchange Commission Chair Gary Gensler said past instances of banks and other firms offering private forms of money have failed.

Gensler reiterated that US securities rules give his agency great authority over digital tokens. He also said there are some “gaps” in oversight of digital tokens that Congress could help close, such as regulating crypto exchanges.

Meanwhile, the US agency that had once been the great hope of the cryptocurrency world is now issuing strong warnings to the industry that it’s in danger of echoing the toxic culture before the 2008 financial crisis.

Michael Hsu, the acting chief of the Office of the Comptroller of the Currency, argued Tuesday that cryptocurrencies and decentralised finance may be evolving into threats to the financial system in much the same way certain derivatives brought near collapse more than a decade ago.

Separately, the Pyth crypto-data network on Monday briefly reported Bitcoin’s price as $5 402. “Engineers are continuing to investigate the cause and a full report is in the works,” it said in a tweet that day.

© 2021 Bloomberg

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