Bitcoin has rallied after plunging below the $40,000 mark for the first time in more than three months, as Tesla boss Elon Musk insists the company will not sell any of its holdings in the cryptocurrency.
Despite the turbulence, celebrities and others who bought in early are still up big – but small investors who jumped on the Bitcoin trend in the past few months may have suffered ruinous losses.
Investors had rushed out of cryptocurrency earlier Wednesday after China sparked a market panic when officials announced a regulatory crackdown. Bitcoin dropped as low as $30,201.96 – down as much as 30 percent before it retraced most of its losses after Musk’s vote of confidence.
By late afternoon trade in New York, the currency was still down about 10 percent on the day, but was well off its earlier lows.
Shoring up the market amid turbulence, Musk indicated the company would not sell any of its Bitcoin holdings, tweeting on Wednesday morning: ‘Tesla has [diamond hands]’.
‘Diamond hands’ is slang popularized by the Reddit forum WallStreetBets, indicating a refusal to sell even in the face of falling prices. Tesla stock was down 2.6 percent in afternoon trading.
Tesla holds roughly 38,700 Bitcoins at an average purchase price of $34,700, according to a DailyMail.com analysis of the company’s public statements, meaning the company’s investment was worth $1.56 billion at Wednesday’s prices.
That means even after the topsy-turvy markets of Wednesday, Tesla still has a gain of more than $200 million.
In the earlier sell-off, cryptocurrencies across the board were hit, and technology platforms that host the digital assets’ trading and other related functions reported being down and, in some cases even suspending withdrawals, adding to the negative tone in markets.
People on Reddit trading boards described losing their shirts and some people even posted telephone numbers for a suicide help line in case the losses led to hopeless feelings.
Bitcoin rallied on Wednesday after plunging below the $40,000 mark for the first time in more than three months
Tesla boss Elon Musk insists the company will not sell any of its holdings in the cryptocurrency
Musk suggested Tesla will not sell its Bitcoin, using the internet slang ‘diamond hands’
‘I know today looks terrible and lots of people lost too much money they can afford to lose, but markets always bounce back so lets not do rash decisions!!! Life is more important!’ one person wrote on Reddit.
Another person wrote that they were selling because they could no longer stand the topsy turvy nature of the cryptocurrency: ‘I’m tired of holding an asset that I’m always worried will crash, is bad for the environment, could get stolen, where the network slows to crawl with even mild usage, will probably depreciate to zero value, and which barely gets used …’
Yet another person said a weekend dip in the currency wiped out $40,000 of his Bitcoin holdings. ‘I actually sold,’ he said, after earning enough to pay off his mortage.
Bitcoin earlier Wednesday tumbled more than 50 percent from a record high of $64,895 hit on April 14, and erased all of its gains since February 8, when Tesla announced it had acquired a stake costing $1.5 billion.
The company later sold off 10 percent of its holdings for a profit of $101 million, a 59 percent gain.
Celebrities who have previously said they own Bitcoin include Twitter CEO Jack Dorsey, former boxer Mike Tyson and Game of Thrones star Maisie Williams.
However, all expressed interest in the cryptocurrency long before the recent price run-up and were unlikely to be in negative territory during the recent crash, presuming they still hold onto their holdings they previously touted.
Dorsey said in 2019 that he spends several thousand a week on Bitcoin, Tyson was an early adopter in 2015, and Williams joined the Bitcoin train last November.
Any Bitcoin purchased before early February of this year is still worth more than it cost to purchase.
However, amateur enthusiasts who jumped on the trend at peak prices over the past two months would have suffered heavy losses.
For example, $1,000 worth of Bitcoin purchased at the peak price would be worth just $618 on Wednesday afternoon, even after the cryptocurrency rebounded off its worst losses.
In March 2019, Twitter CEO Jack Dorsey said that he spends several thousand dollars each week to buy Bitcoin
Former boxer Mike Tyson and Game of Thrones star Maisie Williams have previously said they own Bitcoin, though it is unclear how much they still own
Amid the selloff, Barstool Sports founder Dave Portnoy, a cryptocurrency enthusiast, said that he would not sell as prices plunged.
‘I’m still in on crypto, I do believe buy the dips. I do believe that is a fundamental — if you like crypto, if you believe in crypto, you should never be happier than today, because you can get it on discount,’ he said on a video podcast.
Bitcoin, the biggest and best-known cryptocurrency, had already been under pressure from a series of tweets from Musk, but the news from China sent it as low as $30,201.96 on Wednesday, a 28 percent drop on the day.
China’s announcement on Tuesday reiterated a prior ban on financial institutions and payment companies from handling cryptocurrency transactions. China also warned investors against speculative crypto trading.
Barstool Sports founder Dave Portnoy, a cryptocurrency enthusiast, said that he would not sell as prices plunged
On the Reddit board CryptoCurrency, one person posted a suicide help line
Tesla stock dropped another 4% on Wednesday morning in reaction to Bitcoin’s plunge
Crypto losses from peak prices at Wednesday’s lows
*As of Wednesday at 10 am ET
Bitcoin’s decline whacked other crypto assets, with Ether, the coin linked to the ethereum blockchain network, shedding as much as 38 percent on Wednesday to $1,902.08, marking a 50 percent decline from its record high a week ago.
Meme-based Dogecoin also tumbled, losing 47 percent on the day at one point, according to market tracker Coingecko.
Ether and Dogecoin both followed Bitcoin in rebounding off of recent lows on Wednesday afternoon.
Cryptocurrency prices had already declined last week, sparked by Musk’s reversal on Tesla accepting Bitcoin as payment. His subsequent tweets caused further confusion over whether the carmaker had sold off its holdings of the coin.
Coinbase, the cryptocurrency exchange that went public earlier this year, appeared to be offline amid the frenzied selloff. On Wednesday morning, Coinbase’s website displayed an error message.
Coinbase stock dropped as much as 12 percent in early trading on Wednesday.
Rival exchange Binance also said that it had suspended Ethereum withdrawals due to ‘network congestion’.
Gemini, the ‘next generation’ crypto exchange founded by twins Cameron and Tyler Winklevoss, was also experiencing outages, according to users.
The price of Dogecoin is seen in a one-week view as of Wednesday afternoon
The price of Ethereum is seen in a one-week view as of Wednesday afternoon
Coinbase, the cryptocurrency exchange that went public earlier this year, appeared to be offline amid the frenzied selloff
Cameron Winklevoss commented on the market turbulence earlier this week, tweeting: ‘If you aren’t prepared to HODL, then you probably shouldn’t be here.’
‘Hodl’ is intentionally misspelled slang in the cryptocurrency community, referring to a willingness to ‘hold’ assets in spite of headwinds – or to ‘hold on for dear life.’
Crypto naysayers delighted in the assets’ plunge, with Nouriel Roubini, the economist known as ‘Dr. Doom’ for his consistent bearish predictions and declarations of bubbles, chiming in.
‘Which institutional investors are reckless enough to invest in such a risky and volatile pseudo-asset with no intrinsic value? They should be fired on the spot if undertaking such a reckless speculative gamble!’ tweeted Roubini.
China’s policy statement on Tuesday confirmed bans originally implemented in 2013 and 2017 that bar financial and payment institutions from providing any services related to cryptocurrency transactions, intended to prevent citizens from spiriting their cash out of the country.
Three state-backed industry associations – the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China – said ‘cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency trading speculation activities have rebounded’.
The price fluctuations ‘seriously violate people’s asset safety and disrupt normal economic and financial order’, said the statement, which was posted to social media by the People’s Bank of China.
The notice warned consumers against wild speculation, adding that the ‘losses caused by investment transactions are borne by the consumers themselves’, since Chinese law offers no protection to them.
It reiterated that providing cryptocurrency services to customers and crypto-based financial products was illegal for Chinese financial institutions and payment providers.
‘The crypto markets are currently processing a cascade of news that fuel the bear case for price development,’ Ulrik Lykke, executive director at crypto hedge fund ARK36, told Reuters.
‘News like this can get a lot of traction and easily stir market sentiment but they often prove of little significance in the long term,’ he added.
Some cryptowatchers, however, predicted more losses ahead, noting the fall below $40,000 represented a breach of a key technical barrier that could trigger more selling.
A ‘widespread deleveraging’ was sweeping through cryptocurrency markets, said Saxo Bank’s chief investment officer, Steen Jakobsen, calling the selloff deeper and more widespread than earlier episodes.
‘This is the latest chapter of China tightening the noose around crypto,’ Antoni Trenchev, managing partner and co-founder of London-based crypto lender Nexo, said.
And Adam Reynolds, of Saxo Markets, added: ‘It’s no surprise to me, as Chinese capital controls can be challenged by cryptocurrency purchases in the country and transfers out of the country.
‘So avoiding use of them in the country is essential to maintaining capital controls.’
Bitcoin has had a torrid few days. It took a heavy hit at the start of the week after Musk appeared to suggest Tesla was planning to sell its huge holdings of the unit.
And that came days after the electric car giant said it would halt using it in transactions because of environmental concerns.
China is in the midst of a wide-ranging regulatory crackdown on its fintech sector, whose biggest players – including Alibaba and Tencent – have been hit with big fines after being found guilty of monopolistic practices.
The central bank has also sought to promote its own heavily regulated digital yuan, which it is testing across the country in pilot schemes.
Consumers already widely use mobile and online payments, but the digital yuan could allow the central bank – rather than the big tech giants – greater data and control over payments.