Billions of dollars have fled the cryptocurrency market as an historic bitcoin bull run appears to be over.
Fresh from an all-time high price of $83,000 per bitcoin in mid-April, the cryptocurrency held its price in the mid $70,000s for much of May before a dramatic 30 per cent fall in the past week.
As of Thursday morning, one bitcoin is worth almost exactly $50,000.
The rest of the cryptocurrency market – which bitcoin continues to dominate – has followed suit with many highly capitalised coins seeing weekly losses of between 30 and 40 per cent.
A week ago, Ethereum hit its all-time high of $5,500 but is now worth around $3,300.
Binance Coin, which has seen a recent surge in popularity as a cheaper alternative to Ethereum for decentralised applications, dropped around 44 per cent in value in just seven days as it came off an all-time of nearly $900 on May 10 to being worth less than $500 today.
The current sea of red charts could point to a market correction on a scale not seen since bitcoin gained a mainstream audience in late 2017.
At the time, bitcoin’s price peaked at $23,000 – a figure it wouldn’t reach again until nearly three years later as the latest bull run began ramping up.
This week’s nosedive had been precipitated by a flurry of negative news about bitcoin, and cryptocurrency more broadly, along with greater market activity as speculative investors helped push up the price of meme coins like Dogecoin and Shiba Inu.
Et tu, Elon?
Elon Musk was at the heart of the Dogecoin ride and has seemingly helped dampen sentiment around bitcoin.
In February, Musk’s electric car company Tesla said it bought $1.9 billion of bitcoin and that it would start accepting bitcoin as payment.
For two solid months the price of bitcoin rose in a current of optimism that Tesla was helping legitimate bitcoin as a store of value for business and as a tradeable asset.
Suddenly, Musk changed his tune. A week ago, he tweeted a statement saying Tesla would no longer let people buy cars with bitcoin citing the estimated environmental cost of running the network.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP— Elon Musk (@elonmusk) May 12, 2021
“We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk said.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”
Bitcoin’s price immediately started sliding while Musk drew the ire of bitcoin maximalists and the broader cryptocurrency community for what some alleged was market manipulation.
Yet bitcoin’s fall from grace did not initially signal an end to the crypto boom as the likes of Cardano and Stellar – which had been largely dormant until January – continued to see major hikes in their value.
China steps in
By Wednesday morning the jig was up.
The People’s Bank of China posted a joint statement from three financial industry bodies – the China Internet Finance Association, China Banking Association, and the China Payment and Clearing Association – which effectively called time on China’s involvement with cryptocurrency.
Financial institutions were directed to no longer provide cryptocurrency services to customers: no more trading virtual currency, using it as payment, or developing wallets.
The ban will affect both traders and cryptocurrency miners who may now find it difficult to convert their coins into yuan.
“Virtual currency has no real value support, and prices are extremely easy to be manipulated,” the statement read.
“Related speculative trading activities have multiple risks such as false asset risks, business failure risks, and investment speculation risks.”
It was the latest Chinese crackdown on cryptocurrency since 2017 and has been the killing blow for a record run of gains across the market.
The question now is: how far will cryptocurrency fall?