Bitcoin fell below $40,000 for the first time in more than three months on Wednesday after China declared it banned cryptocurrencies in transactions and warned investors not to trade them speculatively.
The comments left the unit more than 10 percent submerged and hit again shortly after it was hit by comments from mogul Elon Musk and his auto company Tesla.
Trading in cryptocurrencies has been banned in China since 2019 to prevent money laundering as leaders try to prevent people from transferring cash overseas. The country had hosted around 90 percent of the sector’s world trade.
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In a statement, three government-backed industry associations, the China National Internet Finance Association, the China Banking Association, and the China Payments and Clearing Association said that “cryptocurrency prices have skyrocketed and fallen and speculative activity in cryptocurrency trading has occurred skyrocketed. “ricocheted off.”
Price fluctuations “seriously harm the security of people’s wealth and disrupt normal economic and financial order,” said the statement posted on social media by the People’s Bank of China.
The notice warned consumers against wild speculation, adding that “losses from investment transactions are borne by consumers themselves” as Chinese law does not protect them.
He reiterated that providing cryptocurrency services to customers and cryptocurrency-based financial products is illegal for Chinese financial institutions and payment providers.
Bitcoin fell from $45,600 to $39,240 on Wednesday, its lowest level since early February, and was well below the record high of $64,870 seen last month. Analysts have warned it could go as high as $30,000.
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“This is the latest chapter in China tightening the noose around cryptocurrencies,” said Antoni Trenchev, managing partner and co-founder of London-based cryptocurrency lender Nexo.
And Saxo Markets’ Adam Reynolds added, “It comes as no surprise to me as Chinese capital controls can be challenged by buying cryptocurrencies in-country and transfers outside the country. So it is important to avoid in-country use in order to maintain capital controls.”
Bitcoin has had a steamy couple of days. It was hit hard earlier in the week when Musk apparently pointed out that Tesla was planning to sell its huge holdings on the unit.
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And that came days after the electric car giant announced that it would no longer use it for transactions for environmental reasons.
China is in the midst of a widespread government crackdown on its fintech sector, whose major players, including Alibaba and Tencent, have been fined heavily after being found guilty of monopoly practices.
The central bank has also attempted to promote its own highly regulated digital yuan, which it is piloting across the country.
Online and mobile payments are already widely used by consumers, but the digital yuan could allow the central bank to have more data and control overpayments instead of the big tech giants.
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