Tech

Bitcoin tumbles below $40,000 and other coins slide after China signals a crypto crackdown, wiping $280 billion off the market

  • Bitcoin and other major digital assets sank on Wednesday after China warned investors against cryptocurrencies.
  • Virtual currencies can’t be used to conduct business as they don’t have real value, China’s central bank said.
  • A price drop below $30,000 for bitcoin wouldn’t be surprising, a senior market analyst said.
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Bitcoin and other digital currencies plunged on Wednesday after the People’s Bank of China announced digital tokens can’t be used as a form of payment by financial institutions.

An overall drop in the value of digital assets at one point wiped $280 billion from the entire market.

Bitcoin fell below $40,000 for the first time in 14 weeks to trade around $39,585, Binance Coin fell 18% to $426, dogecoin fell 17% to 40 cents, and Ethereum’s ether fell 15% to $2,930.

Virtual currencies shouldn’t be used in the market as they are not supported by real value, three Chinese payment industries said on Tuesday.

Bitcoin continued its week-long slide first sparked by Elon Musk’s climate-related concerns over its mining process. Billionaire Mike Novogratz predicted bitcoin will consolidate somewhere between $40,000 and $50,000 for up to six weeks after Musk’s criticism of its energy use.

Tesla’s cars are powered by electricity made from coal and gas, while bitcoin mining is an energy-intensive process that is said to consume more electricity annually than the whole of Argentina.

GettyImages 1020194172
Bitcoin mining uses vast amounts of electricity.

Read More: How Bank of America is ‘demystifying’ sustainable investments for its $3.5 trillion client base, according to its top ESG strategist

JPMorgan said in a note on Tuesday institutional investors seem to be shifting away from bitcoin, and moving back into traditional gold. This indicates a reversal of the trend seen over the past six months.

“It is not clear what is driving this shift,” strategists led by Nikolaos Panigirtzoglou wrote. “Perhaps institutional investors are fleeing bitcoin as they see its previous two quarter uptrend ending and thus seek the stability of traditional gold away from the rapid downshifting of digital gold.”

Separately, a blockchain research group Elliptic found the hacker group behind the Colonial Pipeline attack received $90 million in bitcoin before it shut down last week.

That has ratcheted up regulatory risks tremendously, according to Jeffrey Halley, a senior market analyst at OANDA. “China’s actions raise the mercury on that front, and the Colonial situation may finally spur the US into action. I suspect they will not be alone,” he said.

Halley said a drop in bitcoin to below $30,000 would not be surprising.

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