Bitcoin plunged below $39,000 for the first time in more than three months on Wednesday
Bitcoin plunged below $39,000 for the first time in more than three months Wednesday after China said cryptocurrencies would not be allowed in transactions and warned investors against speculative trading in them, despite the country powering most of the world’s mining.
The comments sent the unit diving more than 10 percent and dealt it another blow soon after being battered by comments from tycoon Elon Musk and his Tesla car company.
And in a statement, three state-backed industry associations said “cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded”.
The notice warned consumers against wild speculation, adding that the “losses caused by investment transactions are borne by the consumers themselves”, since Chinese law offers no protection to them.
Linghao Bao, analyst at Trivium China, said despite the ban Chinese investors can still find ways to buy cryptocurrencies through illegal vendors.
Bitcoin tumbled Wednesday from $45,600 to $38,570, its lowest since early February, and well off the record high of $64,870 seen last month. It later edged back above $40,000 but analysts have warned it could test as low as $30,000.
Bitcoin has had a torrid few days. It took a heavy hit at the start of the week after Musk appeared to suggest Tesla was planning to sell its huge holdings of the unit. And that came days after the electric car giant said it would halt using it in transactions because of environmental concerns.
Mining cryptocurrency is a hugely energy-intensive process requiring large amounts of electricity in giant data centres.
“If bitcoin was a country, it would use around the same amount of electricity a year to mine as Switzerland does in total,” Deutsche Bank analysts said in a note.
“This has happened before and it happens every year… Crypto is here to stay,” said trader and ex-tech industry worker Zeng Jiajun.
China is in the midst of a wide-ranging regulatory crackdown on its fintech sector, whose biggest players – including Alibaba and Tencent – have been hit with big fines after being found guilty of monopolistic practices.
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