The cryptocurrency market’s massive crash worsened Sunday as a wave of crackdown measures in China continues to rattle investor sentiment, pushing losses to nearly $1.3 trillion since May 12, the day billionaire Elon Musk announced on Twitter that Tesla would no longer invest in or sell bitcoin due to its hefty environmental cost.
The market value of the world’s cryptocurrencies plunged another $200 billion Sunday morning, hitting a new post-peak low of $1.3 trillion by 10:00 EDT after plummeting to about $1.4 trillion early Wednesday.
Save for a handful of stablecoins (whose prices are pegged to a specific fiat value), there wasn’t a single cryptocurrency among the top 100 by market capitalization that hadn’t fallen in the past 24 hours.
The market, which peaked at nearly $2.6 trillion, has nearly halved in just 11 days as bitcoin, ether, dogecoin and cardano plunged 31%, 47%, 43% and 50% over the past week, respectively.
Analysts are pinning recent losses to investor fears over strengthening crypto-regulation in China, where authorities on Friday pledged to “crack down on bitcoin mining and trading behavior” in an effort to “resolutely” control financial risks.
The stark warning came just three days after the nation’s financial regulators issued another notice that helped spark the mid-week plunge, telling banks and payments institutions that conducting any business with cryptocurrencies was prohibited and subject to penalization.
“Crypto has been a casualty of the changing tide in and out of speculation. High-flying assets have increasingly fallen out of favor with inflation worries, and they’re starting to weigh on the market,” Lule Demmissie, the president of Ally Invest, said in a weekend note. “Sure, Elon Musk’s tweets on bitcoin added fuel to the fire, but bitcoin has looked like the classic case of a crowded trade that turned… This week, crypto holders rushed to the exits.”
Despite the crash, Ark Investment CEO Cathie Wood says she still believes bitcoin prices will rise to $500,000 (a staggering 15 times current prices of $33,350), insisting that volatility in the crypto market is to be expected. “We go through soul searching times like this and scrape the models, and yes our conviction is just as high,” she told Bloomberg TV Wednesday, before warning: “You never know how low is low when a market gets very emotional.”
Regulatory concerns have rocked the nascent crypto market before. Despite rising more than 10-fold in 2017, the combined value of the world’s cryptocurrencies crashed more than 80% within months after countries like South Korea started cracking down on then-booming initial coin offerings, which minted new tokens and fueled an investor mania not unlike the recent surge in relatively unknown altcoins. It wasn’t until the pandemic that inflationary concerns and heightened institutional adoption lifted the market to new highs again late last year. The market is still up about 50% from its early 2018 peak, but what’s to come is still very uncertain. Some experts believe the market’s matured enough to recoup its losses, but others are warning that there’s still room for a steeper correction.