The largest digital currency fell as much
as 10% in late Friday trading to as low as $35,636, and peer tokens also posted
double-digit losses. The coin almost hit $30,000 earlier in the week, after
ending May 14 at $49,100.
The latest blow came when China’s State
Council reiterated its call to curtail Bitcoin mining and trading. The crypto
market was already rattled earlier in the week by forced selling and possible
U.S. tax consequences.
Friday’s selloff hit Bitcoin believers
still fuming after onetime proponent Elon Musk did an about-face and criticized
the token for its energy usage. Bitcoin is down about 25% since last Friday,
though it’s up from a Wednesday plunge to as low as $30,000. Other coins have
slumped too — Ether is down about 38% over the past seven sessions.
The sour stretch started with Musk
suspending acceptance of Bitcoin payments at Tesla Inc. and trading barbs with
boosters of the cryptocurrency on Twitter. China’s central bank added to the
downdraft Tuesday with a statement warning against using virtual currencies. On
Thursday, it emerged the U.S. may require crypto transactions of $10,000 or
more to be reported to tax authorities.
China has long expressed displeasure with
the anonymity provided by Bitcoin and other crypto tokens, and warned earlier
that financial institutions weren’t allowed to accept it for payment. The
country is home to a large concentration of the world’s crypto miners, who
require massive amounts of power and thus run afoul of the nation’s efforts to
curb greenhouse-gas emissions.
“The new guidance issued from the
regulatory agencies — they’re taking it more seriously, they want more
enforcement,” Bobby Lee, founder and chief executive officer of crypto storage
provider Ballet, said in an interview Friday. “There’s talk about going after
miners. The question is, can they catch all the miners.”
China’s moves this week highlight the
country’s continued desire to seek control over the notoriously volatile asset
class. It’s something China would rather see regulated by the People’s Bank of
China, market-watchers say.
“It’s not really the mining issue that is
the problem,” said Matt Maley, chief market strategist for Miller Tabak + Co.
“They say they’re doing this as part of an effort to control risk-taking in
their markets, but it’s really a signal that China is not going to be a big
market for cryptos unless it’s a PBOC-controlled one.”
In the meantime, volatility in Bitcoin is
likely to stay elevated. The selloff Friday once again pushed Bitcoin below its
average price over the past 200 days, which to some chartists and technical
analysts suggests it could trend lower still to around $30,000, where it found
support earlier this week.
This week’s swings have led to huge
liquidations by leveraged investors and damaged the narrative that
cryptocurrencies will become more stable as the sector matures. Musk’s actions
showed how just a few tweets can still upend the entire market. But even
moreso, the past few days have renewed the regulatory threat on the crypto
market.
“Investors are underestimating the
regulatory risk of crypto as governments defend their lucrative monopolies over
currency,” said Jay Hatfield, chief executive officer of Infrastructure Capital
Advisors in New York. In the U.S., the possible imposition of transaction
reporting requirements could be the “tip of the iceberg” of potential Treasury
rules on virtual currencies, he said.
As far as regulations in China go, it may
be a game of wait and see.
“You must always proceed cautiously with
China — never get too bullish or bearish,” said David Tawil, president of
ProChain Capital. “We’ll have to see what the regulation brings. It’s one thing
to say, it’s another to do.”