China’s Recent Crypto Ban Plunges Bitcoin Below $40,000

Bitcoin (BTC) took a significant downturn after China recently banned financial and payment institutions from providing cryptocurrency services. The biggest digital coin slumped below the $40,000 mark on Wednesday.

Over the previous week, Bitcoin had already been under a lot of pressure after Tesla CEO Elon Musk announced that they will no longer be accepting it as a form of payment along with a series of tweets. This news from China simply exacerbated the decline sending it as low as $36,250, or a 15% drop in the trading session.

This also marks a 40% dip after hitting a record-high of $64,895 on April 14. The cryptocurrency is set to enter its first monthly decline since November 2018.

Other cryptocurrencies were also hit by Bitcoin’s slump. On Wednesday, Ethereum (ETH) fell to $2,426 after shedding approximately 28%. Dogecoin (DOGE) also reported a loss of nearly 30% at one point.

“The crypto markets are currently processing a cascade of news that fuel the bear case for price development,” explained Ulrik Lykke, executive director at crypto hedge fund ARK36.

“News like this can get a lot of traction and easily stir market sentiment but they often prove of little significance in the long term,” Lykke added.

On the other hand, other crypto watchers believe that Bitcoin’s dip below $40,000 indicates that a key technical barrier has been breached which could trigger more selling. They are forecasting more losses are coming.

JP Morgan analysts also believe investors might be exiting Bitcoin for gold. The selloff of cryptocurrencies is deeper and more widespread compared to previous episodes resulting in a “widespread deleveraging” across crypto markets, said Saxo Bank chief investment officer Steen Jakobsen.

This damages the idea of crypto assets as a viable inflation hedge. In effect, more traditional hedges have since picked up. Gold, for instance, has risen by almost 6% this month.

Given the recent selloff of Bitcoin and other coins, the market capitalization for cryptocurrencies fell to $1.7 trillion from the record-high $2.5 trillion it hit earlier this month.

Source: Nikkei Asia