Bitcoin plunged below $39,000 for the first time in more than three months after China ban financial and payment institutions from dealing in cryptocurrencies. The communist country further warned investors against speculative trading in them, despite the country powering most of the world’s mining.
The announcement sent the bitcoin sliding more than 10 percent and dealt it another blow soon after being battered by tweets from tycoon Elon Musk and his Tesla car company.
Trading in cryptocurrencies has been banned in China since 2019 to prevent money laundering as leaders try to stop people from shifting cash overseas. The country had been home to around 90 percent of the global trade in the sector.
And in a statement, three state-backed industry associations said “cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded”.
The price fluctuations “seriously violate people’s asset safety and disrupt normal economic and financial order”, said the statement, which was posted to social media by the People’s Bank of China.
The notice warned consumers against wild speculation, adding that the “losses caused by investment transactions are borne by the consumers themselves”, since Chinese law offers no protection to them.
It reiterated that providing cryptocurrency services to customers and crypto-based financial products was illegal for Chinese financial institutions and payment providers.
Bitcoin tumbled from $45,600 to $38,570, its lowest since early February, and well off the record high of $64,870 seen last month. It later edged back above $40,000 but analysts have warned it could test as low as $30,000.
Bitcoin has had a difficult few days. It took a heavy hit at the start of the week after Musk appeared to suggest Tesla was planning to sell its huge holdings of the unit. And that came days after the electric car giant said it would halt using it in transactions because of environmental concerns.
China, which powers nearly 80 percent of the global cryptocurrency trade, relies on a particularly polluting type of coal, lignite, to power some of its mining.
