Statement posted on the Chinese Banking Association’s website said financial institutions should “resolutely refrain” from providing services using digital currencies because of their volatility.
Virtually every crypto currency fell after the industry group’s statement. Bitcoin slumped to $30,202 before recovering to $38,038, down 12% on the day, according to Coin desk. Most crypto currencies lost between 7% and 22% of their value and shares of Coin base dropped 5.4%.
And China isn’t the only country clamping down on crypto currencies. Many banks in the Middle East are also barred from dealing in bitcoin, while U.S. regulators appear to be leaning toward more actively monitoring crypto currencies. On Thursday, the Treasury Department said it would require businesses to report any bitcoin payment over $10,000, citing an effort to crack down on tax evasion.
The value of bitcoin can change by thousands of dollars in a short time period. On the last trading day of 2020, bitcoin closed just under $30,000. In mid-April, it flirted with $65,000. The price bounced around after that, with some notable swings, before taking a decidedly negative turn last week.
Doesn’t Elon Musk have a role here?
Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in bitcoin. In March, Tesla began accepting bitcoin as payment. Those actions contributed to the run-up in bitcoin’s price, and Musk also promoted the digital currency Doge coin, which also spiked in value.
However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting bitcoin because of the potential environmental damage that can result from bitcoin mining. The announcement sent bitcoin falling below $50,000 and set the tone for the big pullback in most crypto currencies.
A number of bitcoin fans pushed back on Musk’s reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of bitcoin.
But some companies are using bitcoin?
The digital payment company Square and its CEO Jack Dorsey — also the CEO of Twitter — have been big proponents of bitcoin. Overstock.com also accepts bitcoin.