Bitcoin prices fell as much as 13% on Sunday, extending losses from a gut-wrenching week for cryptocurrencies.
Bitcoin, which accounts for more than 45% of the global crypto market, was trading around $33,000 per coin Sunday morning eastern time — far off its all time high above 64,000 just over a month ago.By Sunday evening, Bitcoin had recouped some of its losses. It was trading at above $35,000, according to Coindesk.
Tesla CEO Elon Musk, whose tweets regularly influence the crypto market, on Saturday underscored his support for digital currencies, giving bitcoin a slight boost after a very rocky week. “The true battle is between fiat & crypto. On balance, I support the latter,” Musk wrote Saturday morning.
Bitcoin inched up above $38,000 but by Saturday night began falling again.Other cryptocurrencies also fell over the weekend. Ethereum was down 20% Sunday morning, trading around $1,900. Dogecoin fell 16% and binance coin was down 26%. (Cryptocurrency markets stay open 24 hours a day, seven days a week.)On Wednesday, a broad crypto crash wiped out about $1 trillion in market value.
The selloff began after Chinese authorities announced further restrictions on cryptocurrency transactions within its borders.Statements from Beijing spooked an already jittery crypto market, and bitcoin plunged 30% to $30,000, its lowest point since January. Ethereum fell more than 40%, and dogecoin and binance lost around 30%.US regulators also hinted at restrictions, with the Treasury Department announcing that any transfer of digital currency valued at $10,000 or more must be reported to the Internal Revenue Service.
This kind of volatility in the crypto sector isn’t new but as the digital coins become more mainstream, their swings are attracting more scrutiny among investors and corporate America.
The recent stretch of losses began on May 12, when Musk did a U-turn on Tesla’s commitment to accept bitcoin payments, citing environmental concerns.
Even with the past week’s losses, bitcoin is still up more than 250% over the past year.
Most other top tokens are also plunging, with ether, XRP and cardano down 7%, 3.5% and 3%, respectively.
The sustained losses come as bitcoin’s rising mainstream adoption “raises correlations with cyclical assets, potentially converting cryptocurrencies from insurance to leverage,” JPMorgan analysts said in a note to clients reported by Bloomberg Thursday
The analysts went on to say that bitcoin is the “least reliable hedge during periods of acute market stress,” an observation that stands in stark contrast to Wall Street experts saying that investors have been flocking to the world’s largest cryptocurrency as a “legitimate hedge against inflation.”
Meanwhile, President Joe Biden’s Treasury Secretary nominee, Janet Yellen, who could be overseeing crypto-critical bureaus like the Financial Crimes Enforcement Network and the Internal Revenue Service, called cryptocurrencies “a particular concern” on Tuesday, suggesting that lawmakers take action to “curtail their use,” particularly to ensure they’re not used for illicit financing.
That’s not stopping institutional players from diving further into the space: Investment giant BlackRock filed documents with the Securities and Exchange Commission on Wednesday to include cash-settled bitcoin futures as eligible investments for two of its funds.
“Bitcoin is showing some vulnerability at the end of such a strong month: It was seeing some pressure at $34,000 Wednesday and has since buckled, making a run at $30,000 highly likely,” noted Oanda Senior Market Analyst Craig Erlam Thursday morning. “This level looks very vulnerable and a break below it is bad news in the near term for bitcoin and cryptocurrencies in general,” he added, before saying he’d be less surprised if prices plunge to $20,000 before they break new highs.
$926 billion. That’s the current market value of all cryptocurrencies, according to CoinMarketCap. That’s down nearly $200 billion, following a record $1.1 trillion earlier this month, with nearly all the losses fueled by bitcoin.
WHAT TO WATCH FOR
Yellen’s not the only Biden nominee with a critical eye on crypto. Gary Gensler, the president’s nominee to head up the SEC, is a former banker who in 2018 said that cryptocurrencies including ether and XRP are akin to securities. In December, the SEC charged Ripple Labs (the firm behind XRP, the world’s third-largest token at the time) and two of its executives with conducting an unauthorized securities offering. In its complaint, the SEC alleged XRP is a security and therefore subject to the agency’s regulatory purview. XRP prices are down more than 60% since then. Meanwhile, an SEC director declared in 2018 that ether was not a security, but he stopped short of making that declaration permanent.