China’s crypto “slap” that sent bitcoin crashing

The world’s most popular cryptocurrency has plummeted.

The price of bitcoin has fallen below $ 34,000 for the first time in three months, after China imposed new restrictions on cryptocurrencies.

The Asian giant on Tuesday banned financial institutions and companies from offering services related to cryptocurrency transactions.

He also warned investors against speculative cryptocurrency trading, something that the price ofl bitcoina twenty%.

The announcement comes after bitcoin fell more than 10% last week, after Elon Musk, Tesla’s chief executive, said in a tweet that he would no longer accept digital currency as a means of payment.

Other cryptocurrencies such as ethereum and dogecoin have also accumulated losses this week of more than 20%.

On the other hand, Tesla shares fell more than 3% on Wall Street, possibly due to the electric car maker’s exposure to bitcoin.

Despite Musk’s tweets, the firm still owns about $ 1.5 billion in digital currency.

China cracks down

Cryptocurrency trading has been illegal in China since 2019 to curb money laundering, the government has maintained.

However, people can still transact with currencies like bitcoin online, something the Beijing government opposes.

On Tuesday, three state-backed organizations, including the China National Internet Finance Association, the China Banking Association, and the China Payments and Clearing Association, issued an advert on social media.

They said that consumers would not have protection in case of incurring losses from cryptocurrency transactions.

They added that recent sharp swings in cryptocurrency prices “seriously violate the safety of people’s assets” and are disrupting the “Normal economic and financial order.”

Neil Wilson of told the BBC that “China has been pushing the crypto market for some time, but this marks an escalation. Other countries could follow the same path as central banks move towards their own digital currencies ”.

So far, he added, “Western regulators have been quite relaxed on bitcoin, but this could change soon.”

The influence of Elon Musk

In March Elon Musk unexpectedly announced that Tesla would allow customers to buy cars with bitcoin.

But last week he took a turn and said he would not accept cryptocurrency for ecological reasons.

Tesla chief executive Elon Musk.
When Elon Musk announced that he would not accept bitcoin as a means of payment, the digital currency fell sharply.

His argument is based on the fact that bitcoin mining – the process by which currency is generated – consumes too much energy.

Since it uses high-powered computers, it often relies on electricity generated with fossil fuels like coal.

“Cryptocurrency is a good idea … but this cannot have a great cost to the environment.

Musk added that he does not intend to sell any of his bitcoins and that he intends to restore cryptocurrency transactions once the currency is generated with more sustainable energy sources.

Although the digital currency cannot be traded in China, more than 75% of bitcoin mining all over the world it takes place in China.

Analysis by Rory Cellan-Jones, BBC Technology Correspondent

For anyone who has followed the cryptocurrency market for a while, the events of the past few weeks are a familiar story.

Any random occurrence, such as a tweet from Elon Musk announcing that Tesla will accept cryptocurrency payments, sends bitcoin to new highs, and people start saying it’s gaining general acceptance.

Then another random event occurs, perhaps a reversal of the tycoon’s course, and the currency crashes again. So the idea that cryptocurrency is becoming part of the mainstream market fades.

Last month in a Clubhouse chat room (another phenomenon that seems to be oscillating between boom and bust) I expressed true skepticism about cryptocurrencies.

Bitcoin walletBitcoin wallet
Getty Images Bitcoin, like other cryptocurrencies, is extremely volatile.

A high-level figure from London’s thriving tech finance scene appeared and said to me, “Rory, Rory, cryptocurrencies are becoming an accepted asset class.”

With the large institutions of the city interested in this market, the message had a true tone, at least in April.

But this week the climate has changed, with the Financial Times reporting on “new doubts among institutional fund managers about the future of cryptocurrencies ”.

My memories went back to 2013, when I first became interested in bitcoin.

In a newspaper report I did for BBC Radio 4, I commented that I had bought a pizza for 0.5 bitcoin.

Getty Images Rory Cellan-Jones bought a pizza in 2013 for 0.5 bitcoin. At today’s price, that pizza would cost him about $ 20,000.

It was a tortuous process that did not seem to be worth the 30 pounds sterling (about US $ 42 dollars at the current exchange rate) that it cost at the time.

Today it would be a pizza for about $ 20,000.

I also wrote a blog post titled “The bubble of bitcoin “, in which I tried to draw some lessons from a period in which the price of the cryptocurrency soared from $ 15 to $ 276 and then fell again at full speed.

I ended my analysis where I compared cryptocurrency to 17th century Dutch tulips or 1980s London houses with this thought:

“Unless bitcoin can be used to buy a sandwich, or accepted by your friends when you pay them for a meal at a restaurant, it’s likely still just a playground for geeks and gamblers.”

Eight years later, it is still practically impossible to buy a sandwich with bitcoin.

And why would you want to do it when there is a good chance that you will be teased a few years later, as I was with my transaction, for giving away an asset that is increasing in value?

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