Bitcoin Price Plunges as China Cracks down on Cryptocurrencies

The price of Bitcoin fell below $34,000 for the first time in three months on Wednesday and other cryptocurrency including Ethereum, Dogecoin, SHIB,etc. showed the same trend, which came after the People’s Bank of China cracked down on cryptocurrencies with issuing warnings against using digital coins as payment.

Bitcoin dropped nearly 7% to $40,275 early Wednesday morning, bouncing off a 24-hour low of $38,585 in a month that has left the No. 1 cryptocurrency 28% lower. Bitcoin hasn’t traded below the $40,000 level since early February. Ether dropped 13% to $2,975 earlier Wednesday, a level not touched since early May, just before the cryptocurrency soared to a record high above $4,000. Ripple dropped around 8% to $1.48.

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Bitcoin was already down this month after Tesla CEO Elon Musk said that Tesla will suspend vehicle purchases using Bitcoin​ citing too much energy consumption.

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.

The agencies said that financial institutions and payment companies should not participate in any transactions related to cryptocurrency, nor should they provide crypto-related services to their clients.

They said consumers would have no protection if they were to incur any losses from crypto-currency investment transactions.

They added that recent wild swings in crypto-currency prices "seriously violate people's asset safety" and are disrupting the "normal economic and financial order".

China's chilly stance toward cryptocurrency goes back years. While the country doesn't completely ban cryptos, regulators in 2013 declared that bitcoin was not a real currency and forbade financial and payment institutions from transacting with it. At the time, they cited the risk that bitcoin could be used for money laundering, as well as the need to "maintain financial stability" and "protect the yuan's status as a fiat currency."