Bitcoin’s fall accelerated Wednesday to exceed 20%, dropping its dollar value to its lowest level since January after China decided to ban financial institutions from offering cryptocurrency-related services.
The best known and most important of these, very popular in recent months, which had exceeded $ 60,000 in March, lost 21.18% to $ 33,795.95 at midday. It was heading for its worst session since March 2020. Its drop from last March’s peak to $ 64,895 is now over 45%, and it could show its first negative monthly performance since November 2018 in May.
Chinese authorities on Tuesday banned financial institutions, including banks and payment companies, from offering their customers any cryptocurrency-related services, publicly warning investors against the speculative nature of this category of financial assets. This is not the first time, however, that China’s “ban” on bitcoin has been announced. In 2017, the government had already announced a series of measures, in particular the ban on bitcoin mining (factory), a measure that was ultimately not applied, China remaining today the country where we find no more cryptocurrency miners. These announcements do not only hurt bitcoins: Ether decreased by 31.24% too.
Tesla’s CEO Elon Musk had already triggered a marked downward movement last week by denouncing the insane energy consumption of bitcoin production and saying he no longer accepting it as a means of payment for his electric cars group.
Crypto markets are currently experiencing a cascade of news fueling a bearish movement in price developments. News like this can have a dramatic effect and easily sway market sentiment, but it often turns out that it doesn’t mean much in the long run.
Other market connoisseurs, however, predicted an acceleration in the decline of bitcoin, explaining that the $ 40,000 threshold was important technical support and that its sinking could trigger a new sell movement. Often presented by its supporters as a diversification asset offering protection against inflation, bitcoin is denounced by its opponents for its extreme volatility and speculative nature.
It could now suffer from arbitrage in favor of gold, estimates JP Morgan based on the available data on futures positions on the CME market and evoking a continued withdrawal of institutional investors.
At the same time, the price of gold has risen by 6% since the beginning of the month.
Writer: Imaaz Nadeem