Battered bitcoin slides another 12 percent after China warning

Fri Jan 6, 2017 11:18am EST
 
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By Jemima Kelly

LONDON (Reuters) - Bitcoin plunged by as much as 12 percent on Friday after China's central bank urged investors to take a rational and cautious approach to investing in the digital currency, which is on track for its heaviest two-day drop in two years.

Bitcoin had been on a tear until Wednesday, gaining more than 40 percent in two weeks to hit around $1,139 on the Europe-based Bitstamp exchange, just shy of its all-time record of $1,163.

But the web-based digital currency, which has shown an intriguing inverse correlation to the Chinese yuan in recent months, plunged as the yuan soared on Thursday, falling as much as 20 percent at one point.

It continued that fall on Friday, with its losses accelerating after the central bank's warning.

It fell as low as $871, down almost a quarter from its peak on Wednesday, before recovering to about $900 by 1455 GMT (9:55 a.m. ET). That still left it down 10 percent on the day and on track for its worst two-day performance since January 2015.

The Shanghai head office of the People's Bank of China (PBOC) noted in a statement that bitcoin prices had shown abnormal fluctuations in recent days, and said those investing in it should do so carefully, with awareness of the currency's volatility.

The PBOC's words carried echoes of its 2013 warning that financial institutions should steer clear of the digital currency, which sparked a $300 slide in bitcoin.

The PBOC also repeated on Friday its 2013 view that bitcoin is not a currency and could therefore not be circulated as a real currency in the market.   Continued...

 
A customer feeds cash currency in to a Bitcoin ATM located in Flat 128, a boutique in New York's West Village, U.S. on August 22, 2014.   REUTERS/Brendan McDermid/File Photo