Bitcoin falls below $40,000 after China ban
By Neil Dennis
06:50, 19 May 2021
Bitcoin fell for the fifth straight day on Wednesday, sliding below the $40,000 level and taking its cumulative losses since hitting its record high little more than a month ago to nearly 40%.
The latest selloff appeared to be prompted by China's announcement on Wednesday that it was to crack down on cryptocurrency dealings at domestic financial institutions due to the recent volatility in the asset class.
The ban effectively reiterates 2017 legislation on trading, but also stops banks and other financial services firms from allowing cryptocurrencies as payments or engaging in any other related services, including exchange transactions.
The ruling was issued by three trade bodies, backed by the country's financial regulators, and warned of the dangers to financial stability from dealing in such volatile assets.
A statement said: "Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order."
China's decree underpinned a slump for bitcoin that has seen the world's biggest cryptocurrency by market cap lose a third of its value in 10 days.
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These losses have been exacerbated by the recent activities of several high-profile crypto-enthusiasts - particularly Tesla founder and chief executive Elon Musk, who said last week his company would no longer accept bitcoin as payment for its vehicles.
Earlier this week, cryptocurrency prices were hit by the suggestion that Musk was selling bitcoin after a popular Twitter commentator said "bitcoiners would slap themselves" when they find out Tesla had dumped its holdings.
Musk replied to this tweet with an enigmatic "Indeed", but later came back to say that Tesla had not sold any bitcoin.
Institutional interest wanes
The cryptocurrency's rise to record highs this year, was founded partially on growing evidence that investors from large financial institutions were rapidly gaining interest in the asset class.
However, Bank of America's latest fund manager survey, published on Wednesday, appeared to indicate any institutional love affair with the cryptocurrency was fading.
When questioned about the "most crowded" trade - the biggest response (43%) was "long bitcoin". Additionally, 75% of the fund managers questioned said bitcoin was a "bubble".
On Wednesday, bitcoin fell 12.7% to $39,547, taking its cumulative losses since hitting its $64,778 record high on 14 April to 39%.
Ethereum fell 14.6% to $2,958, while binance coin lost 18.3% to $425.