Cryptocurrency roundup: Black Friday crypto crash

Welcome back,

Bitcoin fell to a six-week low today below $54,000, in line with turmoil in global markets over the emergence of a new Covid-19 variant.

Here are the top stories that caught our eye

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Black Friday crypto crash

Bitcoin fell to a six-week low today – down as much as 9% to $53,534 – in line with wider markets after a new Covid-19 variant emerged in South Africa. Investors dumped many riskier assets in favour of safe-havens such as the US dollar and bonds.

“Bitcoin has been acting more like a risk asset recently, and today’s rush to safety means the digital token got steamrolled,” says Bloomberg.

Another reason speculators give for holding bitcoin is rising inflation. But the new variant raises questions about the future of central bank monetary policy, with chances of tightening receding, and could derail the global recovery – and potentially even reverse inflation. As Neil Wilson, chief market analyst at Markets.com, says: “Bitcoin is not providing much of a hedge”.

India plans cryptocurrency ban

India is set to go ahead with a contentious plan to ban cryptocurrencies in a long-awaited parliamentary bill. The ban is part of the Cryptocurrency and Regulation of Official Digital Currency bill, and would cover all private cryptocurrencies with only minimal exceptions in place for blockchain, the technology underpinning cryptocurrencies.

India was expected to take a less hardline stance on cryptocurrencies and even possibly regulate them as assets. But the bill could mean cryptocurrency activity in India falling sharply.

Laith Khalaf, head of investment analysis at AJ Bell, says that while “India’s plan to ban cryptocurrencies has not wrought the same damage on the bitcoin price as China’s summer crackdown...it nonetheless marks yet another stumbling block in crypto’s advancement as an economic force in the real world.”

Binance in talk with sovereign wealth funds about taking a stake in the company

Binance, the world’s largest cryptocurrency exchange by volume, has been in talks with numerous sovereign wealth funds about possibly taking a stake in the exchange, says the Financial Times.

Changpeng Zhao, Binance’s chief executive, said that the move, if realised, would help “perception and relationships” with various governments. “But it may also tie us to specific countries . . . which we want to be slightly careful with,” Binance’s CEO added.

Binance has not been immune to growing scrutiny in recent months, coming under pressure from regulators in Canada, Singapore, the UK, among others.

Zhao said Binance was in preliminary discussions to raise capital from many sovereign wealth funds. This is on top of “capital raising for its US affiliate ahead of a public listing,” the FT said.

Zhao did not disclose which sovereign wealth funds the exchange has already held discussions with.

Here’s what happened in the cryptocurrency market in the last seven days:

• Bitcoin fell 4% to $54,160.
• Ether rose 2% to $4,035.20.
• Dogecoin fell 7% to $0.20.
• Cardano fell 14% to $1.53.
• Solana is down 0.5% to $203.

What you need to watch out for

Sweden calls for EU-wide ban on “proof-of-work” cryptocurrency mining

The directors of the country's Financial Supervisory Authority Environmental Protection Agency have called for a ban on the most energy-intensive form of cryptocurrency mining – so called “”proof of work” employed by bitcoin and many other tokens.

In an open letter to the E says that, with China banning crypto-mining, that miners will move in to take advantage of Sweden’s renewable energy, which the country needs "for the climate transition of our essential services".

It's fair to say those calling for a ban are no fans of cryptocurrencies in general. “The social benefit of crypto-assets is questionable”, the letter says, as “crypto-assets are commonly used for criminal purposes such as money laundering, terrorist financing and ransomware payments”.