Why Crypto Dropped This Week
Bitcoin has fell to a more than 3-month low of $38,691 as of today (Wednesday), reversing its strong rally since last month, where it posted its all-time high of $64,789.27 on April 12th.
Negative news over the past week has dampened sentiment for cryptocurrencies. Various reasons for the drop were cited, including Friday’s Turkey central bank action to ban the use of cryptocurrencies and crypto assets for purchases, citing the risks of possible “irreparable” losses.
Meanwhile on May 12, the Tesla CEO Elon Musk said the electric carmaker had suspended vehicle purchases using bitcoin, citing environmental concerns over the so-called computational “mining” process. The most decline came after Musk replied “Indeed” to a tweet from @CryptoWhale about the likelihood of Tesla selling its $1.9 billion Bitcoin stake. And even though Musk followed up with another tweet later saying that Tesla has not sold any Bitcoin, the damage was done. The comments by Musk’s had caused over $300 billion to be wiped off the entire cryptocurrency market that day. The announcement to suspend bitcoin payment came just three months after Tesla revealed in an SEC filing in February, that it bought $1.5 billion worth of bitcoin and would start accepting bitcoin in exchange for its products.
The issue continues Tuesday, whereas three Chinese banking and payment industry bodies issued a statement warning financial institutions banning in conducting virtual currency related business, including trading, or exchanging fiat currency for cryptocurrency.
Data website CoinMarketCap also reported the blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining, for the selloff. There were also unsubstantiated reports that the U.S. Treasury could be planning a crackdown on money laundering carried out through digital assets, pointed out by Bloomberg.
Other cryptocurrencies also plunged. Ether, the digital currency that powers the Ethereum blockchain, was down nearly 15% for the week, to last trade at $2,941. Meanwhile Dogecoin, a cryptocurrency that started as a joke and has been talked up by Musk, fell over 11% to $0.4173.
When an underlying currency or commodity, like cryptocurrency, falls it is no surprise that holders of the asset and producers, known as miners, drop as well. Some of the shares that expected to be embroiled including CleanSpark (NASDAQ: CLSK), Riot Blockchain (NASDAQ: RIOT), Grayscale Bitcoin Trust (OTC: GBTC), and Marathon Digital Holdings (NASDAQ: MARA).