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Home / Markets / Cryptocurrency /  Crypto washout: Bitcoin plunges $30,000, market cap losses nearly $1 tn

The crypto bubble that inflated Bitcoin’s value past $1 trillion and added billions to nonsense digital tokens overnight is bursting.

Bitcoin and ethereum posted their largest one-day drop since March last year on Wednesday, with losses in the market capitalization for the entire cryptocurrency sector approaching $1 trillion.

The sharp declines came after China banned financial and payment institutions from providing cryptocurrency services.

Bitcoin dropped to $30,066, the lowest since late January. It was last down 22% at $33,502. The most popular cryptocurrency posted its largest one-day loss since March 2020.

Ethereum fell to as low as $1,850, its weakest level since late January as well. It was last down 28% at $2,439. Ethereum's one-day losses were the biggest since March last year, while joke token Dogecoin lost 45%.

Bitcoin is now down more than 50% from its record of almost $65,000 set in April. Fueling the volatility is Tesla CEO Elon Musk, whose social-media utterances have whipsawed the crypto community. A statement from the People’s Bank of China on Tuesday reiterating that digital tokens can’t be used as a form of payment added to the selloff.

The selloff dominated market chatter on a day when equities also were tumbling and the Federal Reserve was set to release minutes from its latest meeting. Critics had warned for weeks that the moves in crypto assets were unsustainable and that any sign of a selloff would lead to a rout.

Chart-watchers pointed to key technical levels that have failed.

“From a technical standpoint, the indicators are flashing red," said Ipek Ozkardeskaya, senior analyst at Swissquote in Gland, Switzerland. “The next important support level stands near $37,000, then the $30,000 mark. There is a chance that we see a pullback to these levels and even below, at least in the short run."

Cryptocurrency-linked stocks also dropped, with Coinbase Global Inc. falling 5.2% in U.S. premarket trading and Marathon Digital Holdings Inc. slumping 12%.

Then there’s Musk.

With his often cryptic Twitter posts moving millions, the Tesla chief has become a Svengali-like character in the world of crypto. Bitcoin embarked on a multi-month rally following Tesla’s February announcement, soaring to its $64,870 peak, in large part due to the company’s embrace.

Wiped Out

At the time, Tesla’s acceptance was hailed as a watershed moment for the coin, with many in the crypto world seeing it as yet another step in its evolution.

All that’s been wiped out after Musk sent investors into a tizzy following a mass of head-spinning tweets that started last week when he criticized Bitcoin’s energy use.

Tesla would suspend car purchases using the token, he announced, calling recent energy-consumption trends “insane." Over the weekend, after insinuating his EV company might have sold its Bitcoin holdings, he sent out tweets clarifying that it hadn’t. All of which had traders scrambling.

“Realistically, it is not the first time Elon Musk’s tweets have been erratic and, frankly, wrong," said Ulrik Lykke, executive director at crypto hedge fund ARK36. “The crypto markets are extremely emotionally driven and their participants are prone to overreacting to events they perceive as negative."

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