The crypto market closed its worst-performing week in over a year with another day in the red.
Key Takeaways
- BTC, ETH, and most other leading crypto tokens plunged Sunday in another day of selloffs.
- The market faced a heavy correction this week amid fears over China's regulatory stance on crypto.
- Although sentiment has turned low, it's unclear whether the bear trend will last.
The cryptocurrency bloodbath continues.
Market Faces Heavy Correction
Bitcoin and other crypto assets plunged Sunday, days after one of the market’s biggest crashes in over a year.
The leading crypto slid 11.3%, closing the week almost 29.7% in the red. It’s trading at around $33,320 at the time of writing. Ethereum was down 44.2% on the week after plunging 11.8% on Sunday.
A number of DeFi blue chips, including the native tokens for AAVE, Uniswap, UMA, Curve, and Sushi, were also down over 50% in the last week.
Bitcoin hit a record high of $64,804 in April, while Ethereum was trading above $4,300 on May 12. The rapid change in sentiment has led some to speculate on whether crypto has fallen into a bear market.
The market has been hit by several major selloffs in the last few days. By far the biggest was on Wednesday when Bitcoin crashed over 30%, bringing the rest of the market down with it.
The dip followed three self-regulatory organizations in China clarifying the country’s stance on cryptocurrencies. In a statement, they reiterated bans from 2013 and 2017 that blocked payment institutions from providing crypto services and Initial Coin Offering sales. The note read:
“Virtual currency’s prices have soared and plummeted recently, resulting [in] a rebound of speculative trading activities of virtual currency. It has seriously damaged the safety of the people’s investment and damaged the normal economic and financial orders.”
The Wednesday crash was crypto’s biggest retrace since March 2020 when the market tumbled in response to the Coronavirus. Following the dip, the market trended down on the news that the U.S. Treasury wants businesses transferring over $10,000 worth of crypto to report their transactions to the IRS. If implemented, the ruling would take effect in 2023. China’s state council then hosted a meeting Friday, after which a statement was published vowing to crack down on mining.
It’s not only regulators that have helped cast doubts across the market. Elon Musk helped Bitcoin’s price tank when he announced that Tesla (NASDAQ:TSLA) would stop accepting Bitcoin payments.
Posting on Twitter, Musk said he had concerns with the environmental impact of Bitcoin mining, sparking discussions over the sustainability of Proof-of-Work.
On Wednesday, Pope Francis posted a message urging for the replacement of “technology based on the use of highly polluting fossil fuels,” possibly taking a shot at Bitcoin.
Musk later clarified that Tesla had not sold any Bitcoin and that he supports crypto over fiat, though that hasn’t done much to drive prices up (Musk’s tweets have previously helped the price of Bitcoin and Dogecoin surge).
Over $1 trillion has been wiped out of the market this month, though signs suggest that longer-term holders remain optimistic. Still, if the bull cycle does continue, new highs could be some way off.