Bitcoin and ether tumbled yesterday 19/05/2021 to 3-1/2 month lows, on target to post their largest one-day loss since March last year, within the wake of China's move each day ago to ban financial and payment institutions from providing cryptocurrency services.
At one point during the meltdown, nearly $1 trillion was wiped off the cryptocurrency's market capitalisation .
In late morning trading, the market cap was at $1.65 trillion, consistent with data tracker CoinGecko.com
Bitcoin, the most important and best-known cryptocurrency, had already been struggling from a series of tweets from Tesla boss Elon Musk, but the news from China sent it further down, It hit a 3-1/2-month low of $30,066.
The cryptocurrency has dropped 54% from a record high of $64,895 hit on Pan American Day . it's also heading for its first monthly decline since November 2018.
"Any asset which has risen the maximum amount as bitcoin over the past year are often expected to possess pullbacks as some investors withdraw profits, like we're currently seeing. While often an excellent investment opportunity, traders must remember that Bitcoin remains an emerging asset class and can still experience large price swings," he added.
Bitcoin's decline whacked other crypto assets, with Ether, the coin linked to the ethereum blockchain network, dropping to $1,850, its weakest level since late January. it had been last down 26% at $2,497. Since hitting a record high on May 12, ether has plummeted 57%.
Meme-based dogecoin also tumbled - losing nearly 26% to $0.35, consistent with Coingecko.
Shares within the crypto exchange Coinbase dropped 7.4% on Wednesday. Coinbase's share price has nearly halved from the height hit on the day of its direct listing in April.
Tesla Inc. also fell, down 3.8% at $555.83.
Cryptocurrency price declines last week were sparked by Musk's reversal on Tesla accepting bitcoin as payment. His subsequent tweets caused further confusion over whether the carmaker had shed its holdings of the coin.
China's announcement on Tuesday banning financial institutions and payment companies from providing services associated with cryptocurrency transactions exacerbated selling. China also warned investors against speculative crypto trading.
"The crypto markets are currently processing a cascade of stories that fuel the bear case for price development,"
Some cryptowatchers, however, predicted more losses ahead, noting the autumn below $40,000 represented a breach of a key technical barrier that would trigger more selling.
A "widespread deleveraging" was sweeping through cryptocurrency markets, said Saxo Bank's chief investment officer, Steen Jakobsen, calling the selloff deeper and more widespread than earlier episodes.
Investors can also be exiting bitcoin for gold, analysts at JPMorgan said, citing positioning data compiled on basis of open interest in CME bitcoin futures contracts.
This shows "the steepest and more sustained liquidation" in bitcoin futures since last October, they told clients, adding that it pointed to "continued retrenchment by institutional investors".
The crypto asset selloff at a time when inflation fears are rising hurts the thought of the asset class as an inflation hedge.
Instead, more traditional hedges are gaining ground, with gold up almost 6% this month.
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