Cryptocurrencies like Bitcoin (CRYPTO: BTC) are in the news again this morning… and not for the reason cryptocurrency investors might like. Cryptocurrencies have endured a nasty sell-off overnight.
This might be especially disappointing for those who follow the crypto space. Just last week, Bitcoin climbed back over US$40,000 a coin for the first time since mid-May, perhaps giving the illusion that the crypto crash we have witnessed over the past month or two might finally have turned a corner.
But alas for those optimists, that doesn’t seem to be the case as of yet. Since yesterday morning, Bitcoin has slumped from almost US$36,000 a coin to the current price of US$32,254. That’s a slide of more than 10% in just over 24 hours.
It’s not just Bitcoin either. Ethereum (CRYPTO: ETH) was as high as US$2,264 a coin yesterday morning but is going for US$1,938 this morning, down more than 14% in just over 24 hours. Ethereum is the second-largest cryptocurrency by market capitalisation, behind Bitcoin. The third-largest crypto is Ripple (CRYPTO: XRP). It was almost at 78 US cents yesterday morning. But today, Ripple is down to 62.9 US cents – a drop of close to 20%.
The almighty Dogecoin (CRYPTO: DOGE) has copped some of the worst-selling pressure. It’s down more than 34% since yesterday morning and is sitting at 18.8 US cents a Dogecoin.
A one-word summary of the crypto space in the past 24-30 hours? Ouch.
So why is this happening? According to a report in the Australian Financial Review (AFR) today, crypto investors can largely blame China. This report tells us that China has apparently “summoned officials from its biggest banks to a meeting to reiterate a ban on providing cryptocurrency services”.
The AFR reckons that this is ” is the latest sign that China plans to do whatever it takes to close any loopholes left in crypto trading”.
Obviously, increased barriers to entry into the crypto market itself in the world’s second-largest economy are not good news for said crypto markets. It may also be a harbinger of things to come: what if other countries follow China’s lead? Here’s what Jeffrey Kleintop, chief global investment strategist for Charles Schwab & Co, told the AFR:
The fact that there’s a crackdown there perhaps does take away some of its lustre… I’m not sure it’s a signal of a longer-term change in direction, but it can certainly create some volatility. No one is sure the extent of the crackdown and China is an important player in the bitcoin market.
Who knows where Bitcoin will go from here. But one thing seems certain: the trademark volatility of the cryptocurrency space doesn’t look like it’s going anywhere anytime soon.