Major cryptocurrencies dive after China’s tough move

Bitcoin and other major cryptocurrencies have taken a major hit this morning, after China made a brutal call on the digital tokens.

Bitcoin and other major cryptocurrencies have taken a major hit this morning, after China declared the digital tokens cannot be used as a form of payment.

The largest cryptocurrency fell as much as 5.3 per cent to $US42,430 ($54,260) in New York, continuing a week-long downturn that has been rocked by Elon Musk’s back-and-forth comments on Tesla’s holdings of the currency.

Bitcoin is now at its lowest level since early February, and other cryptocurrencies have been hit hard. Ether lost more than 7 per cent, while last week’s surprise package, Internet Computer, also plunged. Dogecoin also took a hit.

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Bitcoin took a dive this morning. Picture: AFP

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China’s ban means that institutions there, including banks and online payments channels, must not offer clients any service involving cryptocurrency.

“Recently, crypto currency 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,” three industry bodies said in a joint statement on Tuesday.

The institutions must not provide saving, trust or pledging services of cryptocurrency, nor issue financial product related to cryptocurrency, the statement also said.

Beijing has not barred individuals from holding cryptocurrencies, but warned about the risks of cryptocurrency trading.

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It’s been a volatile week on the crypto market. Picture: Odd Andersen / AFP)

The industry bodies said the virtual currencies “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.

Bloomberg reports that Beijing, since 2017, has abolished initial coin offerings and clamped down on virtual currency trading within its borders, forcing many exchanges overseas.

The country was once home to about 90 per cent of trades but the lion’s share of mining and major players have since fled abroad.

Cryptocurrency prices Australia

— Bitcoin $55,442.21

— Ethereum $4381.90

— Dogecoin $0.615297

— SPR $2.05

— Stellar $0.836093

Bitcoin price explained

The dramatic plunge in bitcoin’s price began on May 13 when Musk announced Tesla would stop accepting bitcoin as payment for Tesla vehicles and other products.

His tweet wiped $473 billion off cryptocurrency market.

Tesla & Bitcoin pic.twitter.com/YSswJmVZhP

— Elon Musk (@elonmusk) May 12, 2021

On February 9 this year Musk revealed that Tesla would invest $1.95 billion in the cryptocurrency.

In his announcement this week, Musk said Tesla would not be selling any bitcoin.

“We intend to use it for transactions as soon as mining transitions to more sustainable energy,” he said.

However, he later fuelled speculation Tesla might dump its substantial holdings on Twitter.

“Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their #bitcoin holdings. With the amount of hate [Elon Musk] is getting, I wouldn’t blame him…” @CryptoWhale posted.

Mr Musk responded by writing: “Indeed.”

That send the price of bitcoin plunging. He later clarified that Tesla had not sold any bitcoin.

The latest move by Chinese regulators hasn’t helped the jittery bitcoin market.

China is keen to maintain control over a payments landscape that has become increasingly dominated by technology companies not regulated like banks, Bloomberg reported.

It recently took steps to issue its own digital yuan.

“This is the latest chapter of China tightening the noose around crypto,” Antoni Trenchev, managing partner and co-founder of Nexo said.