The sell-off in cryptocurrencies resumed Sunday afternoon ET with most major coins down plunging 20% to 30% or more in the last 24 hours. Bitcoin, the largest cryptocurrency by market value, is a bright spot only in comparison, being down a mere 16%. Both bitcoin and ether, the second-largest crypto that is down 15%, have now lost half their value from all-time highs set last month.
In recent trading, the price of bitcoin was at $32,297.15, down 14.95%. Earlier in the afternoon it had reached as low as $31,179.69, all but wiping out year-to-date gains. At press time, ether was at $1868.79, down 17.8% after falling as low as $1,733.58. Even with today’s drop, ether is still up 159% year-to-date.
According to Nick Mancini, analyst at crypto sentiment analytics platform Trade the Chain, the specific reason for today’s bloodbath was news from crypto exchange Huobi, which said it’s scaling back some of its offerings in some countries due to China’s increasingly hard line on crypto.
“Right after the news broke, short term Bitcoin sentiment scores plummeted to levels not seen since May 19th, this was followed by a drop in price,” Mancini wrote.
The moves by Huobi are the first concrete steps by a crypto company in response to China’s crackdown and it appears to be making the hard line much more real to investors.
Even though Huobi was the specific catalyst for today’s plunge, it’s just the latest negative news in the sector that has been battered in the last few weeks. Fears of the crackdown on crypto in China, fears of coming regulation in the U.S. and Tesla turning its back on bitcoin have all pummelled the market.
New investors to crypto, attracted by the massive gains in the space earlier in the year, are now unnerved by a price graph that isn’t constantly moving up and to the right, according to Joe DePasquale, CEO of BitBull Capital. Illustrating how the string of bad news has rattled new investors, the search query “Should I sell my bitcoin?” soared on Google over the past week, according to CryptoSlate.
Thus the Huobi announcement reached an audience already expecting the worst and the effect of that negativity was intensified by the usual low volume found on a weekend, producing a selloff of memorable proportions.
Going forward, several analysts said they see $30,000 as a strong support and, with a lot of liquidations out of the way, a possible recovery in the coming week.
Tesla’s announcement on May 12 that it would no longer accept crypto as a form of payment due to environmental concerns helped set off the wave of selling that has gained strength with each new source of worry. In the process, all the gains in the price of bitcoin that Tesla helped fuel with its announcement on Feb. 8 that it had bought $1.5 billion in bitcoin for its balance sheet are now gone.
For those who enjoy a bit of schadenfreude, Tesla has been caught up in the snowball it helped create. According to a recent article in Fortune, Tesla likely bought its $1.5 billion in bitcoin at about $34,700 a piece. In the company’s Q1, Tesla’s bitcoin stash was the best performing part of the carmaker’s business. Now, unless there is a recovery in the price of bitcoin between now and July 1, Tesla shareholders should brace themselves for an impairment in the company’s Q2 earnings report.
That could help explain yesterday’s somewhat pro-crypto comment by company CEO Elon Musk, who was responding to a tweet asking, “Yo Elon what do you think about the peeps who are angry at you because of crypto.” Musk said, “The true battle is between fiat and crypto. On balance, I support the latter.”