Bitcoin, Ethereum, and other big cryptocurrencies plunged on Wednesday in a selloff fueled by concerns of a Chinese ban and the fallout from Tesla’s unexpected turnaround on digital currencies.
During Wednesday morning’s crypto bloodbath, Bitcoin lost nearly 30% of its value at one point but recovered some of those losses by midday. According to CoinDesk data, Bitcoin was trading at around $40,426 at 1:30 p.m. ET, down nearly 8% in the last 24 hours.
In the meantime, Ethereum has dropped more than 15% in the last 24 hours, and by midday Wednesday, the digital currency was valued at about $2,890, a significant decrease from an all-time peak of $4,382 only one week earlier.
On Tuesday, three Chinese state-backed financial institutions released a joint statement warning about the risks of cryptocurrencies due to their uncertainty. The National Internet Finance Association, the Banking Association, and the Payment and Clearing Association all issued joint statements urging members not to engage in virtual currency-related business.
Meanwhile, Tesla CEO Elon Musk changed direction on Bitcoin last week, declaring in a tweet that the blockchain will no longer be used as payment because of its connections to fossil fuels. Tesla will not sell any of its Bitcoin holdings but will use it for purchases “as soon as mining moves to more renewable resources,” according to Musk.
During the height of the crypto bear market on Wednesday morning, Musk sent out a tweet that seemed to say Tesla would keep rather than sell its Bitcoin holdings, using emojis of a diamond and hands to express his message.
“Diamond hands” is a phrase coined by the WallStreetBets subreddit (famous for its GameStop short squeeze) to describe someone who is able to hold onto a stock amid uncertainties or defeats in order to achieve a long-term target.
Cryptocurrency investments have grown in popularity in recent months, especially among individual investors, thanks to platforms like Robinhood — and, later, Venmo and PayPal — making the currencies more available.
Coinbase was the first big digital currency exchange to go public in the United States last month, with a Nasdaq listing.