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Bitcoin tanks below $40,000; here’s why

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Bitcoin continued its week-long slide triggered by Elon Musk’s back-and-forth remarks on Tesla’s holdings of the digital currency. Extending its losses, the cryptocurrency fell below $40,000 on Wednesday, May 19.

As per the latest data on Coinbase (at around 11.30 am), Bitcoin was trading at $38,570.90 (on May 19). This is the cryptocurrency’s lowest level since February 2021 and comes after knocking a peak of $64,895 last month.

It had dipped as much as 5.1% to $42,547 in New York on May 18. Bitcoin’s price traded below $45,000 on May 16 following a tweet by Tesla CEO Elon Musk, who has been a forthright supporter of cryptocurrency, suggesting that the California-based company may be mulling offloading its bitcoin holdings.

The most popular digital currency has been on a downward spiral over the past few months because of regulatory hurdles and Elon Musk’s comments on the digital currency.

While his erratic approach towards some digital currencies has led to their massive sway, the latest shocker came from China’s new ban on crypto transactions.

China’s clampdown on crypto transactions

The country has proscribed financial institutions and payment companies from providing services related to cryptocurrency transactions and warned investors against speculative crypto trading. It was China’s latest attempt to clamp down on what was a burgeoning digital trading market.

Under the ban, such institutions, including banks and online payment channels, must not offer clients any service involving cryptocurrency, such as registration, trading, clearing, and settlement, the three industry bodies – the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China –  said in a joint statement on Tuesday, Reuters reported on May 19.

Elon Musk’s back-and-forth remarks

Bitcoin’s latest drop downwards was majorly pushed by Musk’s late cognizance that cryptocurrencies are “energy-intensive”, as in not environment friendly. Tesla’s CEO took a lot of flak from crypto fans for specific views and thus re-assessed his outlook on Bitcoin due to its carbon emissions through a tweet. He also shared a chart from the Cambridge Bitcoin Electricity Consumption Index (CBECI) to back his opinion.

Considering the energy consumption by Bitcoin miners, Musk added that Tesla would no longer accept the cryptocurrency as a payment means for its electric cars. The news led to a fall in Tesla prices as well, resulting in Musk losing his position as the second richest person in the world.

His stance on Bitcoin has been moving prices for the cryptocurrency over the past one month. Musk’s latest Twitter communications also sparked rumours that Tesla may offload all of its Bitcoin holdings. However, he later put all speculations to rest stating that the company hadn’t sold any of its holdings. This bolstered the price of Bitcoin.

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