Cryptocurrencies namely Bitcoin, Ethereum and Dogecoin, on Wednesday, crashed after China declared its solemn decision to ban financial and payment institutions from providing cryptocurrency services. For two months now, both Bitcoin and Ethereum have been witnessing fall due to various factors but on Wednesday, both the popular crypto currencies recorded their highest ever one day loss. Additionally, other cryptocurrencies too recorded their largest fall on a tough day for investors. Overall scrutinizing the crypto market, the market lost about $1 trillion in less than 24 hours before recovering late night.
According to the reports, bitcoin dropped to $30,066, its lowest since late January. It was also seen that bitcoin plunged about 50% from its April high of $65,000. Reportedly, the most popular cryptocurrency posted its largest one-day loss since March 2020. However, the most popular cryptocurrency has been on a downward trajectory for the last week. This is due to the fact that twitter famous, Elon Musk announced that Tesla will not accept Bitcoin as payment method due to ‘environmental concerns. Additionally, second most popular Ethereum fell to as low as $1,850, which was its weakest since late January.
The entire crypto market has gone from $2.5 trillion to $1.5 trillion in just 7 days as it suffers a meteoric crash.
The Chinese crackdown
It is no news that Chinese crypto investors, now for a long time, have been on the wrong side of the law. China has made trading in cryptocurrencies illegal in the country since 2019. This significant decision was taken to curb money laundering which is possible due to the anonymous character of the trader which is guaranteed by crypto trading. However, people continue to invest and trade in popular currencies like Bitcoin through popular online platforms. On Tuesday, three state-backed organizations, namely the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China issued a warning on social media.
It was stated that investors will no longer have protection if they were to incur any losses from crypto-currency investment transactions. They went on to strictly add that recent fluctuation in crypto prices “seriously violate people’s asset safety”.
China also barred financial institutions and payment companies from providing any services related to cryptocurrency transactions.
The investors reacted to the news immensely and the tremendous sell-off led to a crypto crash on Wednesday. As several trading platforms including Binance and Coinbase crashed, it led to a further panic among investors who started selling their share of crypto. However, it is to be noted that China’s decision isn’t the only reason behind the sharp decline. Elon Musk and Tesla’s snub too contributed to the high volatile nature of the crypto market on Wednesday.
Elon musk and Tesla
Recently, Elon Musk and Tesla have been huge promoters of cryptocurrencies. Being an avid user of the twitter, Musk’s tweets have often helped push Bitcoin and Dogecoin in the upward direction, so much so that that bitcoin’s value rose by a humungous 400%. His recent decision to not accept Bitcoin as payment for Tesla cars, didn’t go well with investors at all.
Citing environmental concerns as the reason, Musk tweeted that “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,”.
Though, Musk had cleared that the electric carmaker did not intend to sell any of its Bitcoin (after its $1.5 billion investment) and intended to reinstate crypto-currency transactions once mining shifted to using more sustainable energy sources. This somewhat helped Bitcoin from bleeding.