The price of the famously volatile digital currency fell nearly 30% at one point after the China Banking Association warned member banks of the risks associated with digital currencies. The decline narrowed to below 10% in the afternoon, but Bitcoin had still lost about $70 billion in market value in 24 hours.
Bitcoin has lost about 38% of its value since April 13 when it hit a high of more than $64,800, according to Coindesk. The China warning was just the latest headwind: Before Wednesday, Tesla’s decision to not accept the digital currency as payment for cars _ after it said it would _ and murmurings in Washington about tighter regulation of digital currencies had put pressure on Bitcoin. The price is still up about 31% in 2021 and nearly 300% from a year ago.
Here’s a look at Bitcoin and digital currencies in general:
HOW BITCOIN WORKS
Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive Bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients’ ..
Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators _ and criminals.
Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. According to Coinbase, there are about 18.7 million Bitcoins in circulation ..
Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoin’s price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.WHAT HAPPENED TO THE PRICE?
On Wednesday, a statement posted on the Chinese Banking Association’s website said financial institutions should “resolutely refrain“ from providing services using digital currencies because of their volatility.Virtually every cryptocurrency fell after the industry group’s statement.
As of 4:15 p.m. eastern time Wednesday, Bitcoin was down more than 7% at around $40,310 per coin. Most cryptocurrencies lost between 7% and 22% of their value and shares of Coinbase dropped 5.4%.
It’s not unusual for the value of Bitcoin to change by thousands of dollars in a short time period, though swings totaling around $20,000 in one day are extreme. On the last trading day of 2020, Bitcoin closed just under $30,000. In mid-April, it flirted with $65,000.
Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoin’s price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.
However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting Bitcoin because of the potential environmental damage that can result from Bitcoin mining. The announcement sent Bitcoin falling below $50,000 and set the tone for the big pullback recently in most cryptocurrencies.
A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka. But a University of Cambridge study last year estimated that on average, 39% of “proof-of-work” crypto mining was powered by renewable energy, primarily hydroelectric energy.
The digital payment company Square and its CEO Jack Dorsey _ also the CEO of Twitter _ have been big proponents of Bitcoin. Overstock.com also accepts Bitcoin, and in February, BNY Mellon, the oldest bank in the U.S., said it would include digital currencies in the services it provides to clients. And Mastercard said it would start supporting “select cryptocurrencies” on its network.
Bitcoin has become popular enough that more than 300,000 transactions typically occur in an average day, according to Bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards.