Bitcoin and ether fell to three-and-a-half-month lows, posting their biggest daily loss since March last year, following China’s move to ban financial and payment institutions from providing cryptocurrency services.
Several benchmark Chinese banking federations considered that cryptocurrencies “are not true currencies” and warned of the danger of “speculation”, in a country that is preparing its own digital currency.
Bitcoin, the broadest and most well-known cryptocurrency, had already been under pressure from a series of tweets from Tesla boss Elon Musk, but news from China pushed it back to a three-and-a-half-month low of $ 30,066.
At its worst this day, bitcoin had lost more than half its value compared to its record just a month ago, on April 14, of $ 64,895. The cryptocurrency is also heading for its first monthly decline since November 2018.
“The sharp drop in the price of bitcoin shouldn’t surprise the market,” said Gavin Smith, CEO of cryptocurrency consortium Panxora.
“Any asset that has risen by as much as bitcoin in the last year can be expected to have pullbacks as some investors take profits, as we are currently seeing. Although it is often a brilliant investment opportunity, traders should remember that bitcoin continues. being an emerging asset class and will continue to experience large price swings, “he added.
Bitcoin’s decline hit other assets. Ether, the currency linked to the ethereum network, fell as low as $ 1,850, its lowest price since January, but then fell 26% to $ 2,497. The coin is down 57% from an all-time high on May 12.
Crypto exchange operator Coinbase Global, miners Riot Blockchain, and Marathon Digital Holdings also saw their share price drop by 6%.
“On its own, I don’t see that (the crash) as a systemic concern right now,” said St. Louis Federal Reserve Chairman James Bullard. “We are all well aware that cryptocurrencies can be very volatile.”
Cryptocurrency price drops last week were triggered by Musk’s remarks that Tesla will no longer accept bitcoin as payment. However, after having lost up to 30% of its value, bitcoin limited its losses on Wednesday precisely because of a message from the founder of Tesla.
The most famous cryptocurrency was down 8.5% at $ 39,587. The prices recovered after a tweet from Musk, who implied that his company, which bought the equivalent of 1.5 billion dollars at the beginning of the year, did not sell them, contrary to what a previous message from him suggested.
Musk decided, in mid-May, to reject payments in bitcoin for his electric vehicles, contrary to a previous commitment to accept them, wielding the environmental risk caused by the high energy consumption to generate this cryptocurrency.
“Cryptocurrency markets are currently processing a cascade of news fueling the bearish argument for price development,” said Ulrik Lykke, CEO of crypto hedge fund ARK36.
Driven by interest from increasingly serious investors – from Wall Street institutional banks to Silicon Valley giants – the cryptocurrency market grew to more than $ 2.5 trillion in mid-May 2020, according to Coinmarketcap, which collects information of almost 10,000 cryptocurrencies.
The Chinese regulator is not the only one to worry about the rise of the cryptocurrency market: its counterparts in Europe and the United States are asking investors for caution, although they have not prohibited transactions.
With information from Reuters and AFP.
