Bitcoin's rally gains steam as IMF urges investors to be 'aware of risks'

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Bitcoin's rally gains steam as IMF urges investors to be 'aware of risks'

By Todd White and Eric Lam
Updated

The January rollercoaster for cryptocurrency investors eased on Thursday as Bitcoin held onto gains after roaring back from its first plunge below $US10,000 since December.

Bitcoin climbed 6.1 per cent to $US12,069, a Bloomberg composite pricing showed. It stayed above $US10,000 all day, following a frantic 24 hours in which the token swung through a $US2,600 range. Rivals ethereum and litecoin both rose more than 5 per cent, while Ripple jumped 26 per cent.

"Any big figure like '$10,000' or '$20,000' can be perceived as a psychological level for traders in any market," said Daire Ferguson, chief executive officer of Irish online currency platform AvaTrade. "But markets are fickle. Trends are always there to be broken, or re-defined."

Bitcoin is mounting its best two-day performance of 2018 amid almost daily criticism of the free-wheeling, half-a-trillion-dollar world of digital coins by authorities from Russia and South Korea to the US that have put investors on edge.

Cryptocurrecnies have steadied after a plunge earlier this week.

Cryptocurrecnies have steadied after a plunge earlier this week.Credit: Chris Ratcliffe

"The regulatory crunch is coming," said Neil Wilson, market analyst in London for online trading platform ETX Capital.

"But because regulators have yet to do anything seismic, there is still plenty of buyers to be found -- second-wave buyers who'd feared they'd missed out on the boom, choosing to enter the market at more attractive prices."

IMF says to be 'aware of the risks'

Overnight, the International Monetary Fund weighed in, calling for global coordination on cryptocurrencies as it warned of the risks from surging prices.

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"Greater international discussion and cooperation among regulators, yes, would be helpful," IMF spokesman Gerry Rice told reporters in Washington.

While Rice didn't elaborate on what type of coordination is needed, the push for action comes as digital currencies such as Bitcoin become an investment phenomenon and household name. Bitcoin's value soared last year and attracted mainstream investors, who are seeing unpredictable gains and losses.

"When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy," Rice said. "It's important for people to be aware of the risks and take the necessary risk-management measures."

Comparing the asset class to Viagra, which was discovered in heart-medicine research, a Russian central banker Wednesday said that holders of cryptocurrencies now view them not as a means of payment, but as an investment asset.

Crypto as 'pyramid'

"It's absolutely clear that regulators won't do anything to facilitate the promotion of these pyramids," first deputy governor at Bank of Russia Sergey Shvetsov said.

The week isn't bereft of positive news for digital coins. Morgan Stanley Chief Financial Officer Jonathan Pruzan said the bank has been clearing Bitcoin futures contracts for big institutional clients and convenes a regular meeting of executives to consider how else to engage with cryptocurrencies.

Even so, Bitcoin's gyrations in 2018 have investors, regulators and onlookers debating whether the speculative bubble may have popped after a 1,400 percent ascent last year. Jitters across the globe over a potential bloodbath helped wipe as much as $400 billion off the global market value of digital assets from its Jan. 8 high through mid-Wednesday.

"This market is volatile and there is not enough capital in it to stabilise," Darren Franceschini, chief executive with Blockchain Technologies Consulting, said in an email.

While South Korean authorities are debating a potential ban on local exchanges, China seems to be widening its crackdown on the industry.

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Bixin, one of China's larger operators for the so-called wallets that hold digital coins, said it was suspending all OTC trading and escrow trading on Wednesday, blaming "uncertainties regarding regulation policies." No re-start date was set.

Bloomberg

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