Bitcoin is 'a giant pyramid scheme,' says Pinboard founder

CNBC's "TechCheck" discusses the bear case on bitcoin with Maciej Ceglowski of Pinboard. Subscribe to CNBC PRO for access to investor and analyst insights on crypto and more: https://cnb.cx/2BT2E7y

Bitcoin pared its gains and briefly dipped into negative territory on Thursday amid news that the Treasury Department is setting forth its crackdown efforts.

The world’s largest digital currency last traded 1.8% higher around $39,600 after turning red briefly. Earlier in the session, bitcoin bounced back 9% above $42,000, according to Coin Metrics.

Bitcoin cut gains after the Treasury Department said it is taking steps to crack down on cryptocurrency markets and transactions, and said it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service.

Some of bitcoin’s newer alternatives also pared gains after the headline. Ether last traded up 3% after jumping 13% earlier. Dogecoin, a meme-inspired crypto that has been talked up by Elon Musk, gained 7% after surging 17% to 42 cents following a tweet from the Tesla CEO.

On Wednesday, bitcoin dived 30% to nearly $30,000 at one point, before paring some of those losses. The entire crypto market lost hundreds of billions of dollars of value in a single day.

The move lower was driven by mixed signals from Musk — who came out as a believer in bitcoin earlier this year — and a regulatory clampdown on the market in China.

Last week, Musk said his electric car company had suspended vehicle purchases with bitcoin due to environmental concerns. Mining the cryptocurrency uses more energy than entire countries like Argentina and Ukraine, according to Cambridge University researchers.

Earlier this week, Musk suggested Tesla may have sold its bitcoin holdings, only to later clarify that it had “not sold any bitcoin.” On Wednesday, he tweeted the “diamond hands” emoji, implying that the electric vehicle maker would not shed any of its bitcoin.

Also weighing on bitcoin’s price Wednesday was the news that China had banned financial institutions and payment firms from providing cryptocurrency-related services, reiterating its tough stance on digital currencies.

“If you look at the history of bull markets, a correction of this size, between 30-40% of bitcoin price, tends to be part of the bull market,” Alyse Killeen, founder and managing partner of bitcoin-focused venture capital firm Stillmark Capital, told CNBC Wednesday.

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