More Bad News for Bitcoin

Bitcoin is living up to its reputation of being a volatile currency. Wednesday 19 May saw its value dip below the $34,000 mark. That’s the lowest it’s been in three months and China and a change of mind by a top supporter is to blame.

Tuesday 18 May saw them ban the providing of cryptocurrency transactions by payment companies and financial institutions. A warning was also made that warned investors not to indulging in speculative crypto trading.

The value of Bitcoin had already been on a downward trend. That was in reaction to the news that Tesla were to no longer accept the currency as a payment method. They aren’t the only cryptocurrency to be dropping in value. Ethereum and Dogecoin have also seen big drops in recent days.

Now comes the problems in China but they have been anti-cryptocurrencies for a while now. Trading in cryptocurrencies has been illegal in the country for the past couple of years. Action was taken in order to crack down on money laundering.

The government crackdown hasn’t been fully enforced though with online cryptocurrency trading taking place online. Over 75% of Bitcoin mining takes place in China.

A trio of state-backed organisations went onto social media on Tuesday to warn people against using cryptocurrencies. Warnings included the absence of any protection if cryptocurrency investments resulted in losses being made. The recent rises and falls in their value “seriously violate people’s asset safety,” they said. The same could be said of any investments though.

The fear now is that other countries will follow the route taken by China. Western regulators haven’t been so aggressive. However, Central banks are making progress in introducing their own digital currencies. Making life difficult for current cryptocurrencies looks like becoming a way of life for them.

On Tuesday, three state-backed organisations, including the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China issued a warning on social media.

Losing the support that has been received is the last thing that Bitcoin wanted. Tesla had been a good ally with its boss Elon Musk making positive tweets about the cryptocurrency. His support had seen the value of Bitcoin rising. Now all of a sudden he’s done a U-Turn worthy of Boris Johnson.

Musk says that there are environmental concerns behind the decision to suspend purchasing vehicles using Bitcoin. He has worries over Bitcoin mining and its use of high powered computers via electricity using fossil fuels. The use of coal is a particular worry due to its terrible emission levels.

His damaging view is that although he believes cryptocurrency is a good idea, it “cannot come at great cost to the environment.” Cue the drop in the value of Bitcoin even before the latest comments from China.

It’s not all bad news though. Musk says that Tesla won’t be selling any of their Bitcoin. Transactions using the cryptocurrency can continue when more sustainable energy sources are used for mining of Bitcoin.

The recent falls in value show how vulnerable cryptocurrencies can be. Imagine making an investment knowing that an unfavourable tweet can cause values to drop. Then again, a positive tweet can see the value go higher. It’s an investment for the very brave.