Bitcoin slides below $59,000 as strong dollar and Chinese ban weigh on crypto

• U.S. dollar rallied to its highest level since July 2020

• Chinese state planner NDRC said that it would continue to clean up crypto mining in the country

Cryptocurrencies slid on Tuesday, with some of the most popular digital coins losing more than 10%, retreating from near-record highs, as some investors pointed to the stronger dollar as a catalyst for the fall, while some 

Bitcoin, the world’s largest digital token by market cap, dropped more than 10% to fall below $60,000, slipping as low as $58,673 at one point, and later recovered some of the losses and is trading at around $61,000.

The slump comes after a record surge that powered Bitcoin to $68,525.84.

Ether, the second-biggest cryptocurrency, fell for a fifth consecutive day and dropped more than 12.5% to $4,111.

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“A lot of people view crypto as a risk-on investment,” Martha Reyes, head of research at Bequant, a crypto exchange, told WSJ. In times of stress, “people will be looking to raise cash, and they will raise cash where they’ve maybe had the most profits.”

Investors are showing signs of nervousness as the U.S. consumer price index (CPI) surged 6.2% in October compared to a year ago, the biggest inflation surge in more than 30 years, with a surge in COVID-19 cases in the northern hemisphere as winter approaches.

Traditional safe-haven assets such as gold have rallied recently, and the U.S. Dollar index reached its highest level since July 2020 on Tuesday.

The dollar’s strength is also a signal that investors continue to bet that the Federal Reserve may have to raise interest rates to deal with inflation, WSJ reported citing researchers at Capital Economics. Higher rates would attract yield-seeking capital flows to the U.S.

China’s 2060 carbon neutrality target

On the other hand, in a press conference on Tuesday, the Chinese state planner, the National Development and Reform Commission (NDRC), said that it would continue to clean up digital currency mining in the country.

Earlier this year, Beijing cracked down on Bitcoin mining, citing concerns about the amount of fossil fuel-generated energy being used, leading to an exodus of miners.

Mining “causes large energy consumption and carbon emission. It has no active impact to lead industry development or scientific progress,” Meng Wei, NDRC spokesperson, said in Mandarin.

“Regulating cryptocurrency mining activities has significant meaning in optimizing our industrial structure, saving energy and cutting emission, achieving carbon emission and neutrality goals.”

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Last year, Chinese President Xi Jinping announced that the nation aims to achieve carbon neutrality by 2060.

The NDRC has said it would focus on state-owned companies involved in cryptocurrency mining and is considering imposing “punitive electricity prices” against those participating in cryptocurrency mining activities but paying a residential electricity price.

Picture Credit: PYMNTS