Bitcoin and other major cryptocurrencies slumped after the People’s Bank of China reiterated that the digital tokens cannot be used as a form of payment. The largest cryptocurrency fell as much as 5.1% to $42,547 in New York; continuing a week-long slide sparked by Elon Musk’s back-and-forth comments on Tesla Inc.’s holdings of the coin.
Bitcoin is now at its lowest level since early February. Ether lost more than 7% at one point; while last week’s sensation, Internet Computer, continued its plunge. Dogecoin also slid.
“This is the latest chapter of China tightening the noose around crypto,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lender.
Virtual currencies should not and cannot be used in the market because they’re not real currencies; according to a notice posted on PBOC’s official WeChat account. Financial and payments institutions are not allowed to price products or services with virtual currency.
Beijing since 2017 has abolished initial coin offerings and clamped down on virtual currency trading within its borders; forcing many exchanges overseas. The country was once home to about 90% of trades; but the lion’s share of mining and major players have since fled abroad.
China has recently taken steps to issue its own digital yuan; seeking to replace cash and maintain control over a payments landscape; that has become increasingly dominated by technology companies not regulated like banks.
Meanwhile, the latest Bank of America fund manager survey showed that “Long Bitcoin” is the most crowded trade in the world right now. The poll captures 194 fund managers with $592 billion worth of AUM overall.
“The fact that the BofA manager survey shows that the ‘long Bitcoin’ trade is the most crowded one on the Street right now isn’t helping either,” said Matt Maley, chief market strategist for Miller Tabak + Co. “When an asset becomes the most crowded trade in the BofA survey, it has frequently signaled a near-term pullback in the past. When you combine this with the news out of China; it’s not a surprise that Bitcoin is seeing some more weakness.”
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