The cryptocurrency market is facing its worst moment since the beginning of the year after China’s central bank announced new bans on transactions and services involving digital currencies in the country. The news was disastrous for the main assets, which faced massive liquidations driven by investors’ fear of the news. Bitcoin (BTC) has plummeted to its lowest price since January, while ether (ETH) and dogecoin (DOGE) have dropped more than 40%. As a result, cryptocurrencies lost about $ 750 billion in market value on Wednesday (19).
Exchanges register sales of $ 9 billion in 24 hours
Bitcoin operated at $ 45,000 yesterday morning. In just 24 hours, the cryptocurrency plummeted to the $ 30,000 minimum price in a lightening 30% devaluation.
Ether, the second largest digital asset on the market and native to the Ethereum blockchain, also suffered from the Chinese authorities’ announcement, falling more than 40% in the same period. Not even dogecoin, the digital currency based on a meme and supported by Elon Musk was able to save itself, losing more than half of its value overnight.
This strong devaluation that has taken over the cryptocurrency market has been driven by intense sales that have taken over the largest exchanges, which have even experienced instability due to intense user activity. According to data from the monitoring site bybt.com, about $ 9 billion in digital assets have been liquidated in the past 24 hours.
The digital currency market, which was once worth more than $ 2 trillion, fell to a minimum value of $ 1.35 trillion after the wave of sales, representing a devaluation of about $ 750 billion, according to the CoinMarketCap.
China’s bans encourage asset sales
The chaos started after the People’s Bank of China banned financial institutions in the country from accepting cryptocurrencies in payments and restricted the offer of services and related products. The new regulations have alerted investors, who have started selling their assets.
“Recently, cryptocurrency prices have skyrocketed and plummeted, and the speculative trade in digital assets has rebounded, seriously breaching the security of people’s property and disrupting the economic and financial order,” Chinese officials said in a statement late on Tuesday .
The People’s Bank of China also reiterated that cryptocurrencies “are not real currencies” and that they “should not and cannot be used for market transactions”. The Chinese government also referred to the appreciation that bitcoin and other digital assets underwent in 2021 as pure speculation.
Market conditions have become highly volatile and prices have plummeted as sales have intensified. Binance and Coinbase, two of the largest cryptocurrency exchanges in the world, experienced technical problems on their platforms when activity by users trying to dispose of their assets peaked around 10 am today.
Stock exchange affected by cryptocurrency drop
American bonds that depend on cryptocurrency trading and prices also declined earlier in the day. Coinbase’s shares depreciated by up to 12%, while those of MicroStrategy, the software company that has become one of the biggest bitcoin investors, fell 15%.
Shares of Marathon Digital Holdings, a digital currency mining company, fell 13%, while Galaxy Digital Holdings, an investment firm owned by the famous billionaire Michael Novogratz, fell 12% on the stock exchange.
New restrictions prepare China for the digital yuan
The recent measures by the Chinese government are preparing the country’s payment system for the launch of its CBDC, the digital yuan. Thus, the People’s Bank of China needs to limit institutional adoption to private cryptocurrencies, such as bitcoin. In this way, the state digital currency would prevail more easily.
“Part of the reason for this decision is that they have their own digital yuan. Another factor is the lack of control that the government has over financial transactions. Ultimately, they also try to ensure that people are not deceived, ”said Paul Haswell, a partner at the Pinsent Masonic law firm in Hong Kong, to the Financial Times.
Government plans for a digital yuan would give the central bank a record of all transactions using the CBDC in real time. In addition, state-owned cryptocurrency makes it possible to create a digital payment mechanism capable of rivaling PayPal and many other international services.
Elon Musk and his onslaught against bitcoin
The CEO of Tesla and SpaceX is partially responsible for the recent devaluation of bitcoin. The digital currency was already losing value for several days in a row due to statements by Elon Musk.
Last week, he announced that Tesla stopped accepting bitcoin in payments for its electric cars due to concerns about the environmental impact of cryptocurrency mining. That day, the digital asset fell by about 15%.
Last weekend, Musk stirred the market again by suggesting in a tweet that Tesla could sell its entire $ 1 billion fortune in digital assets. In addition, he again criticized the cryptocurrency and reiterated his support for dogecoin (DOGE). As a result, bitcoin plunged another 15% on Monday.
With information: Financial Times, Reuters