Musk's tweets send bitcoin on a wild ride 1:03
Hong Kong (CNN Business) -
Bitcoin and other cryptocurrencies are sinking as anxiety sweeps through the market, this time after China took more steps to stamp out digital currencies.
The world's most traded cryptocurrency plunged 10% on Wednesday to trade at $ 40,728 per unit, according to Coindesk, a news and information website specializing in crypto assets.
That's the lowest level for bitcoin since February.
It also represents a 36% drop from reaching a record $ 63,347 in April.
Bitcoin was already falling this month after Tesla CEO Elon Musk said he was wary of its environmental impact.
But a new announcement from a trio of Chinese banking and financial watchdogs appears to have further shocked the cryptocurrency markets.
The agencies said on Tuesday that financial institutions and payment companies should not engage in any cryptocurrency-related transactions, nor should they provide cryptocurrency-related services to their clients.
Cryptocurrency prices have recently spiked and fallen, and speculative trading has rebounded.
This seriously damages the security of people's property and disrupts the normal economic and financial order, ”said the statement from regulators supervised by the People's Bank of China and the China Banking and Insurance Commission.
China's cold attitude towards cryptocurrencies dates back years.
While the country does not completely ban cryptocurrencies, regulators declared, in 2013, that bitcoin was not a real currency and prohibited financial and payment institutions from transacting with it.
At the time, they cited the risk that bitcoin could be used for money laundering, as well as the need to "maintain financial stability" and "protect the status of the yuan as a fiat currency."
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The public can own or trade cryptocurrencies, but that trade has been closed to major exchanges in mainland China.
In 2017, authorities also banned initial coin offerings, a way that tech startups raise money by issuing
crypto
tokens
to the public.
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The mounting crackdown may also be in part to boost the Chinese state-backed digital yuan initiative, and authorities are working to implement that they can keep money flows under their strict supervision.
While the 2013 notice only mentioned bitcoin by name, some observers have considered that it would apply to all cryptocurrencies, given Beijing's dislike of these currencies.
On Wednesday, the state-run China Times newspaper described the latest ad as a "risk warning by nature."
While it is not a national law or regulation, it represents an "industry standard to some extent," the outlet wrote, citing Zhu Youping, an official with the State Information Center, a group of policy-making experts.
Still, it shows that China is not changing tack with cryptocurrencies anytime soon, and that seemed to be enough to worry traders.
Along with the bitcoin crash, several other major cryptos fell on Wednesday.
Ethereum plunged 14%, trading at $ 2,978, a 31% drop from the peak reached last week.
Cryptocurrency meme dogecoin lost 13%.
"The Chinese position on cryptocurrencies is clear from the outset: the trading and use of cryptocurrencies is simply prohibited," wrote Ipek Ozkardeskaya, a senior analyst at Swissquote, in a research note on Wednesday.
"So the news is nothing 'new', but since cryptocurrency traders are too sensitive to negative news today, it adds to the downward pressure on cryptocurrencies."
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Before China's latest announcement, Tesla's Elon Musk had already sent the cryptocurrency markets on a wild ride.
It changed its mind last week on a plan to allow its electric car maker to start accepting bitcoin as payment for its cars by suspending the program, citing sustainability concerns surrounding bitcoin mining.
The cryptocurrency fell 12% afterwards.
It continued to fall earlier this week, after Musk appeared to suggest that his automaker may have abandoned its holdings of the digital currency, although he later clarified that it had not.
Dogecoin, meanwhile, fell earlier this month after Musk, the currency's most prominent supporter, joked about it on "Saturday Night Live."
But the two cryptocurrencies are still astronomically higher than a year ago.
Bitcoin is up 323% over the past year, according to Coinbase, while dogecoin is up 670%.
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