NEW YORK • Bitcoin slid to a 2½-month low on Thursday before steadying in Asia after a regulatory probe into crypto exchange Binance added to pressure from Tesla chief Elon Musk's U-turn on accepting the digital currency.
Bloomberg reported on Thursday that as part of the Binance inquiry, the US Department of Justice and the Internal Revenue Service have sought information from individuals with insight into the crypto exchange's business.
Bitcoin dropped to US$45,700, the lowest since March 1, then pared its losses to trade at US$49,312 in Asia yesterday.
The world's largest cryptocurrency fell 17 per cent on Wednesday following Mr Musk's remarks that Tesla would stop accepting the digital token as payment for its electric cars for environmental reasons.
"Environmental matters are an incredibly sensitive subject right now, and Tesla's move might serve as a wake-up call to businesses and consumers using bitcoin, who hadn't hitherto considered its carbon footprint," said Mr Laith Khalaf, an analyst at AJ Bell.
Bitcoin remains about 70 per cent higher for the year and is more than 1,000 per cent higher than its 2020 low of US$3,850.
Binance did not immediately respond to a request for comment. A spokesman said the company does not comment on specific inquiries but takes its legal obligations seriously and engages with regulators in a collaborative fashion.
Ethereum, the second-largest cryptocurrency, dropped to a session low of US$3,543.62 and last changed hands at US$3,656, down about 4 per cent. On Wednesday, it hit a record high of US$4,380.64.
Tesla's announcement on Feb 8 that it had bought US$1.5 billion (S$2 billion) of bitcoin and would accept it as payment for its electric vehicles was one factor behind the digital currency's surge this year.
Mr Musk has faced pressure over bitcoin's environmental impact. The cryptocurrency relies on computers competing to solve elaborate mathematical problems, a process that uses huge amounts of electricity.
"We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel," he tweeted.
His comments roiled markets even though he said Tesla would not sell any bitcoin and would resume accepting it as soon as "mining" for it transitioned to more sustainable energy.
In a second tweet on Thursday, he denounced the "insane" amount of energy used to produce bitcoin, which pushed its price lower.
Mr Jeffrey Wang, Vancouver-based head of the Americas at Amber Group, a cryptocurrency service provider, said broader selling of risk assets in traditional markets was another factor behind Wednesday's bitcoin plunge.
"I don't think everything is selling off just because of this news. This was kind of the straw that broke the camel's back in terms of adding to the risk sell-off," he added.
Cryptocurrency dogecoin lost more than a third of its price on Sunday after Mr Musk, whose tweets had stoked demand for the token earlier this year, called it a "hustle" on the Saturday Night Live comedy show.
By Tuesday, however, he was asking his followers on Twitter if they wanted Tesla to accept dogecoin, and it jumped yesterday in Asia after he tweeted about it again and said he was working on improvements to its transaction systems.
Dogecoin rose 20 per cent to 52 US cents yesterday, according to Binance, and last traded at 48.25 US cents.
REUTERS
