Bitcoin struggles for momentum after latest sell-off

The Internal Revenue Service in the US has said it needs more authority from Congress to regulate the cryptocurrency industry. Photo: Getty Images

Cryptocurrencies were broadly higher on Wednesday morning and are slowly trying to recover losses from the latest sell-off as their volatile start to the month continues.

Bitcoin (BTC-USD) was up almost 5% and was trading at $34,398 (£24,272), edging closer to $40,000 but still far from its all-time high of $63,000. Ethereum (ETH-USD) ticked up 0.1% to trade at $2,521 and joke token dogecoin gained 0.5%, trading at $0.33.

“There seems to be significant uncertainty in play. Beyond just price, demand for transactions and settlements has waned considerably. Almost all on-chain activity metrics point to a big decline from the all-time highs earlier in the year,” said Simon Peters, analyst at multi-asset investment platform eToro.

Bitcoin recovered some of its losses on Wednesday morning. Chart: Yahoo Finance UK

Bitcoin recovered some of its losses on Wednesday morning. Chart: Yahoo Finance UK

The uncertainty in part may be down to US investigators recovering some $2.3m in bitcoins paid in ransom to a hacking group called DarkSide. The group was involved in a ransomware attack on Colonial Pipeline, the largest pipeline system for refined oil products in the US.

“We have a lot of cash requirements in our country, but we haven’t figured out, in the country or in the world, how to trace cryptocurrency,” CNBC quoted Senator Roy Blunt as saying.

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“You can’t trace the ransomware — the ransom payment of choice now. And we’ve got to do a better job here,” he added.

Meanwhile the Internal Revenue Service in the US has said it needs more authority from Congress to regulate the cryptocurrency industry and collect information on transfers valued at over $10,000 that mostly go unreported.

“We get challenged frequently, and to have a clear dictate from Congress on the authority of us to collect that information is critical,” commissioner Charles Rettig said during a Senate Finance Committee hearing, adding that “by design, most crypto virtual currencies are designed to stay off the radar screen.”

The Biden administration’s fiscal 2022 revenue proposals include a requirement that cryptocurrency transfers of $10,000 or more be reported to the IRS in the same way banks report cash transfers. The proposed change would start in 2023.

Earlier in the week, cryptocurrencies had plunged after former US president Donald Trump said bitcoin was a “scam”.

And the weekend had been turbulent following reports Chinese social media site Weibo suspended “key opinion leaders”, reigniting fears of further crack down in the country. 

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