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Bitcoin Tanks as Much as 30% as Cryptos Plunge into Chaos

Cryptocurrencies slide in chaotic trading, Bitcoin dives to a session low under $30,000. Crypto-related companies take a hit as well.

SageFX - May, 20, 21

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Principal Points

  • Cryptocurrencies slide in chaotic trading, Bitcoin dives to a session low under $30,000
  • Crypto-related companies take a hit as Tesla, Coinbase, and MicroStrategy drop

Cryptocurrencies gyrated wildly in an extremely volatile trading session on Wednesday. The madness started after Chinese authorities warned financial institutions not to accept cryptocurrencies as payment or offer related services and products.

The sell-off in bitcoin began minutes after the news spread and hours later the world’s largest currency was lower by more than 30% on the day. Other digital coins nosedived alongside bitcoin, as well as cryptocurrency-related companies such as Coinbase and Tesla.

On Wednesday, bitcoin slipped below $30,000 and traded near levels last seen at the end of January. The correction, however, lasted just a few hours before crypto investors piled into bitcoin and others, making the drop look more like a flash crash rather than a bear market. After dropping to a session low of $29,800, or a 32% decline on the day, the orange coin shifted gears and started climbing, recovering some of the losses.

Bitcoin close the session on Wednesday at $38,300, or nearly 29% higher than the intraday bottom. Still, bitcoin ended the day in negative territory, lower by 11%. Cryptocurrency traders and investors have been living with this chaotic volatility and wild swings for years now. Many traders, on the other hand, were wiped out of the market. Over 800,000 traders were liquidated yesterday, collectively losing nearly $9bn as their accounts were wiped off the market, according to real-time data from Bybt liquidations. Some cryptocurrency exchanges even halted their trading and suspended withdrawals.

Dogecoin Experiences the Plunge Too

Other cryptos, not just Bitcoin, took a big hit, including Dogecoin, which fell 54% yesterday to $0.22 from $0.48. The meme-coin later pared some of the losses as it gained enough buying momentum to lift its price to levels above $0.35. Ether was 26% lower at the end of the day, closing at $2,536, after an earlier decline of 45% to $1,890.

In the past couple of days, the crypto market sell-off intensified and total market value declined by more than $500bn to current levels of around $1.7tn. Bitcoin’s market share now stands at about $750bn, down 38% from its peak of $1.2tn in mid-April. The price of Bitcoin is now hovering around $39,000 per token.

Apart from Chinese regulators clamping down on cryptocurrency, the steep downturn yesterday was largely attributed to Elon Musk shunning Bitcoin. Over the past few days, the CEO of Tesla and SpaceX criticized Bitcoin on Twitter and aroused speculation that his car company could have sold its Bitcoin stack. Mr. Musk confirmed Tesla still holds its Bitcoins, even though the car company suspended car purchases with the digital currency citing the detrimental environmental impact of the Bitcoin mining process.

Cryptocurrency-related stocks fell Wednesday. Tesla, which holds over 40,000 Bitcoins, fell roughly 2.5% Wednesday, after sliding more than 5% during regular hours. Tesla is now roughly 36% lower from its all-time high in late January. Coinbase, the cryptocurrency exchange that recently became a publicly-traded company, shed 6% and is now down over 30% from the initial price on its first day of trading a little over a month ago. And MicroStrategy, the software firm which regularly makes headlines by announcing new Bitcoin purchases, tanked 6.6% yesterday. MicroStrategy now hovers about 65% lower from its peak market price in early February.