Bitcoin and other digital currencies plunged on Wednesday after the People’s Bank of China announced digital tokens can’t be used as a form of payment by financial institutions, Business Insider reports.
Bitcoin fell as much as 31%, to $30,016.83. Binance Coin fell 32% to $337.27, dogecoin fell 30% to 36 cents, and Ethereum’s ether fell 44% to $1,918.773 at intraday lows.
Bitcoin continued its week-long slide first sparked by Elon Musk’s climate-related concerns over its mining process.
Billionaire Mike Novogratz predicted bitcoin will consolidate somewhere between $40,000 and $50,000 for up to six weeks after Musk’s criticism of its energy use.
Tesla’s cars are powered by electricity made from coal and gas, while bitcoin mining is an energy-intensive process that is said to consume more electricity annually than the whole of Argentina.
JPMorgan said in a note on Tuesday institutional investors seem to be shifting away from bitcoin and moving back into traditional gold.
Strategists led by Nikolaos Panigirtzoglou said it is not clear what is driving the shift. They wrote:
Perhaps institutional investors are fleeing bitcoin as they see its previous two-quarter uptrend ending and thus seek the stability of traditional gold away from the rapid downshifting of digital gold.
Meanwhile, a blockchain research group Elliptic found the hacker group behind the Colonial Pipeline attack received $90 million in bitcoin before it shut down last week.
This according to Jeffrey Halley, a senior market analyst at OANDA, has ratcheted up regulatory risks tremendously. He said:
China’s actions raise the mercury on that front, and the Colonial situation may finally spur the US into action. I suspect they will not be alone.
Halley said a drop in bitcoin to below $30,000 would not be surprising.