$ 280 billion was wiped from the crypto market as Bitcoin fell beneath $ 40,000 for the primary time in 14 weeks

In this photo illustration, a visual representation of the digital cryptocurrency, Bitcoin can be seen in Paris, France, on February 9, 2021, ahead of the Bitcoin rate graph.

Chesnot | Getty Images

Bitcoin fell sharply on Tuesday and continued a big sell-off that began a week ago.

The digital currency fell over 13%, hitting an intraday low of $ 38,585.86 around 12:54 a.m. ET, according to CoinDesk data. It was the lowest since February 9, when it last fell below $ 40,000.

Negative news over the past week has dampened sentiment for Bitcoin.

On May 12, Tesla CEO Elon Musk said the electric car maker had suspended Bitcoin vehicle purchases, citing environmental concerns about what is known as the computational “mining” process. Powerful computers are used here to solve complex math puzzles and enable transactions in Bitcoin.

Musk’s comments resulted in over $ 300 billion being wiped from the entire cryptocurrency market that day.

The announcement that it would suspend payment of Bitcoin came just three months after Tesla announced it had bought $ 1.5 billion worth of Bitcoin and would accept Bitcoin in exchange for its products.

Earlier this week, the Tesla CEO made it clear that the company “didn’t sell Bitcoin”.

On Tuesday, three Chinese banking and payment companies issued a statement warning financial institutions not to engage in any virtual currency-related business, including trading or exchanging fiat currency for cryptocurrency.

China’s hard line on digital currencies isn’t new. In 2017, the authorities closed the local cryptocurrency exchanges and banned so-called ICOs (Initial Coin Offerings), a way for companies in this area to raise money by issuing new digital tokens.

Traders in China once had a large stake in the Bitcoin market, but after the crackdown, their influence was significantly reduced. Chinese cryptocurrency operations have been relocated abroad.

Bitcoin is still up over 40% since the start of the year and 320% in the past 12 months.

Other cryptocurrencies also crashed. Ether, the digital currency that powers the Ethereum blockchain, fell nearly 15% to $ 3,001.70 at 1:15 a.m. ET. Dogecoin, a cryptocurrency that started as a hoax and was raised by Musk, fell over 18% to $ 0.4076, according to Coinmarketcap.com.

Around $ 279.65 billion had been wiped from the total value of the cryptocurrency market within 24 hours of 1:18 a.m. CET.

Close to the bottom for Bitcoin?

Bitcoin is around 39% below the all-time high of $ 64,829.14 that was hit in mid-April.

Vijay Ayyar, head of business development at Cryptocurrency Exchange Luno, said a 30% to 40% pullback was “normal” during bitcoin bull markets.

“So that’s very much expected after we hit $ 64,000,” he said.

Ayyar pointed to a correction of around 35% in January, as well as similar declines during the huge spike in Bitcoin price in 2017.

“We’re definitely close to the bottom,” he said, between $ 38,000 and $ 40,000.

Bitcoin bull Mike Novogratz told CNBC on Tuesday that he saw $ 40,000 as the buy level for the digital currency. The investor, who runs cryptocurrency financial services and investment management Galaxy Digital, expects Bitcoin to consolidate in a trading range between $ 40,000 and $ 55,000.

“Then we have another leg up. And I don’t just say that by guesswork. We see institutions moving in, and it takes a while,” said Novogratz.

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