Bitcoin Slides Under $40,000 After China Warning

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Created by TradeOr

3rd Party Analysis 19 May 2021

Key Takeaways

  • Bitcoin tumbles to a four-month low after Chinese authorities issue a warning
  • Over $300bn wiped off the market on Tuesday as crypto investors retreat

Bitcoin Slides Under $40,000

Bitcoin fell sharply on Tuesday extending its decline from previous sessions. The biggest crypto asset dropped 12% today reaching a session low of $38,500, Bitcoin’s lowest level since February 9. The four-month low arrived swiftly after the news spread that Chinese regulators have issued a statement that says financial and payment institutions should not accept cryptocurrencies as payment or offer services and products related to them.

According to the joint statement issued by the People’s Bank of China, banking and internet industry associations, digital currency “is not a real currency”, and “should not and cannot be used as currency in the market”. The statement also labeled the recent stratospheric rise in prices as “speculation”.

Stuck Between China’s Crackdown and Elon Musk’s Bash

The warning to Chinese payment companies not to accept cryptos is the most recent blow to the cryptocurrency market. The ban added momentum to the downside pressure from last week when Tesla announced it will no longer accept Bitcoin as payment for its electric cars. Moreover, Tesla Chief Executive Elon Musk spent a lot of time over the weekend on Twitter, dueling with Bitcoin supporters and bashing Bitcoin. Tesla cited environmental concerns over Bitcoin’s mining process. While Mr. Musk commented on Twitter that Bitcoin is “actually highly centralized, with supermajority controlled by handful of big mining (aka hashing) companies.”

Hours after Elon Musk criticized the cryptocurrency, over $300bn were wiped off the entire crypto market.

The recent hard line by China is not new. Chinese regulators have been putting efforts to crack down on cryptocurrencies since 2017. Back then, authorities shut down local cryptocurrency exchanges and banned the so-called initial coin offerings (ICOs).

Still, today’s uncertainty spread relatively quickly across crypto assets. The retreat knocked off about $300bn from the valuation of the crypto market. Bitcoin is now off about 39% from its all-time high, but still up over 30% year-to-date.

Ether today took a bigger hit, down over 16% on the day, but still up more than 320% since the start of the year. The Ethereum token is now trading around $2,900. Dogecoin also tumbled. The meme-coin slipped 22% from $0.49 to a session low of $0.38 and is currently trading around $0.41.

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