The price of bitcoin briefly dropped below $30,000 in volatile trading, wiping out almost all of its gains for the year, with a sweeping regulatory crackdown putting the world’s leading digital asset under persistent pressure.
Bitcoin fell as much as 12 per cent on Tuesday to $28,824 in the latest leg of a sell-off that has pulled the cryptocurrency down more than 50 per cent from its April peak of almost $65,000. It recovered later in the day to around $32,000.
The recent drop in bitcoin has cascaded across many other parts of the digital asset market, knocking “alt-coins” such as ether and dogecoin.
A crackdown by global authorities seeking to rein in the largely unregulated market has gained steam in recent weeks.
China, which was one of the world’s most important digital currency markets, has banned the mining of bitcoins in major provinces — an essential process needed to record and verify transactions and create new coins. The country’s central bank on Monday warned several of its largest state-owned banks and Jack Ma’s Alipay to “investigate and identify” bank accounts facilitating cryptocurrency trading and block all corresponding transactions.
Fundstrat, a boutique research house based in New York, said the selling that began on Monday was “largely driven by regulatory pressures from China”. Michael Saylor, chief executive of MicroStrategy, one of the biggest corporate proponents of bitcoin, agreed that China’s clampdown was a “dominant driver”. “This created a forced and rushed exodus of Chinese capital and mining from the bitcoin network,” he wrote on Twitter.
Shares in MicroStrategy fell more than 10 per cent in New York at one point on Tuesday, before cutting their losses to nearer 5 per cent. The group has purchased the coins at an overall cost of $2.7bn, reflecting an average price of just above $26,000 each, the company said on Monday. It most recently bought about $500m of bitcoin at a price of about $37,600.
In a sign that the regulatory issues go beyond China, global regulators this month called for cryptocurrencies to carry the toughest bank capital rules of any asset, arguing that requirements for holding bitcoin and similar tokens should be far higher than those for conventional stocks and bonds.
Bitcoin last dropped near this level in May, when a combination of a crackdown on coin mining and usage in China, and an acknowledgment by bitcoin champion Elon Musk of the industry’s environmental impact, sent the price spiralling lower. The episode demonstrated that, when crypto prices fall, the lurches lower can be rapid.