In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is on display in front of the Bitcoin course’s graph on February 09, 2021 in Paris, France.
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Bitcoin fell below $37,000 for the first time in over three months on Wednesday, continuing a major sell-off that began a week ago.
The digital currency was down 20% in the last 24 hours, according to Coinbase. The cryptocurrency hit an intraday low of around $36,189 at 7:30 a.m. ET. It was the lowest level since Feb. 3, when bitcoin hit a low of $35,393.
That means bitcoin has now erased all its gains following Tesla’s announcement that it would purchase $1.5 billion worth of the cryptocurrency. Bitcoin is down more than 30% in the last week, according to Coinbase.
Negative news over the past week has dampened sentiment for bitcoin.
On May 12, Tesla CEO Elon Musk said the electric carmaker had suspended vehicle purchases using bitcoin, citing environmental concerns over the so-called computational “mining” process. This is where high-powered computers are used to solve complex mathematical puzzles to enable transactions using bitcoin.
Musk’s comments caused over $300 billion to be wiped off the entire cryptocurrency market that day.
The announcement to suspend bitcoin payment came just three months after Tesla revealed that it bought $1.5 billion worth of bitcoin, and would start accepting bitcoin in exchange for its products.
Then on Tuesday, three Chinese banking and payment industry bodies issued a statement warning financial institutions not to conduct virtual currency related business, including trading or exchanging fiat currency for cryptocurrency.
China’s hard line on digital currencies is not new. In 2017, authorities shut down local cryptocurrency exchanges and banned so-called initial coin offerings (ICOs), a way for companies in the space to raise money through issuing new digital tokens.
Traders in China once accounted for a huge share of the bitcoin market but after the crackdown, their influence was reduced significantly. Chinese cryptocurrency operations have moved abroad.
Bitcoin is still up 40% year-to-date and more than 300% in the last 12 months.
Other cryptocurrencies also plunged. Ether, the digital currency that powers the Ethereum blockchain, was down nearly 16% at $2,960.29 at 4:30 a.m. ET. Dogecoin, a cryptocurrency that started as a joke and has been talked up by Musk, fell 16% to $0.4189.
Around $270 billion had been wiped off the entire value of the cryptocurrency market in 24 hours as of 4:30 a.m. ET.
Close to a bottom for bitcoin?
Bitcoin is off by about 38% from its all-time high of $64,829.14 which was hit in mid-April.
Vijay Ayyar, head of business development at cryptocurrency exchange Luno, said that a 30% to 40% pullback is “normal” during bitcoin bull markets.
“So this is very much expected after we topped out at 64K ($64,000),” he said.
Ayyar pointed to a roughly 35% correction in January as well as similar falls during the huge run-up in bitcoin’s price in 2017.
“We are definitely close to a bottom” around $38,000 to $40,000, he said.
Bitcoin bull Mike Novogratz told CNBC on Tuesday that he sees $40,000 as a buying level for the digital currency. The investor, who runs cryptocurrency financial services and investment management Galaxy Digital, said he expects bitcoin to consolidate in a trading range between $40,000 to $55,000.
“Then we’ll have another leg up. And I say that not just by guessing. We see institutions moving in, and it takes them a while,” Novogratz said.