(Bloomberg) —
Bitcoin took investors on a wild ride Wednesday, plunging as much as 29% before cutting the drop in half in a bout of selling that drew attention across Wall Street and social media.
The extreme volatility in an asset known for its swings caused outages on major crypto exchanges and at one point brought Bitcoin’s market value down $500 billion from its peak last month. The tumult elicited a tweet from Elon Musk and signaled a “capitulation” on Cathie Wood’s crypto monitors.
Bitcoin plunged as much as 29%, wiping out more than $500 billion in value from the coin’s peak market value. It was down 15% to $36,700 as of 10:53 a.m. in New York. It has erased all the gains it clocked up following Tesla Inc.’s Feb. 8 announcement that it would use corporate cash to buy the asset and accept it as a form of payment for its vehicles. Ethereum, the second-biggest coin, sank more than 40%, while joke token Dogecoin lost 45%.
Read More: World’s Top Crypto Platforms Disrupted as Bitcoin, Ether Tumble
The selloff dominated market chatter on a day when stocks and commodities were also under pressure and the Federal Reserve was set to release minutes from its latest meeting. Frantic selling sparked outages on some of the biggest exchanges, from Coinbase Global Inc. to Binance. #Cryptotrading was trending on Twitter, where critics and fans alike were in a tither over the rout.
Tesla CEO Elon Musk sparked the wild moves last week. Bitcoin plunged when he announced the carmaker wouldn’t take it as a payment, but then reversed when he said the company had no plans to sell its corporate crypto holdings. He seemed to imply in a tweet Wednesday that Tesla is not selling into the rout.
“This is going to be the first ‘welcome to crypto’ day for a lot of new entrants,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial. “The history of these assets has been littered with aggressive rallies and sickening selloffs.”
Bitcoin plunged to within a whisker of $30,000, leaving it down more than 50% from its April 14 record of almost $65,000. It was down 14% to $37,000 as of 11:30 a.m. in New York. Ethereum sank 36%, Binance Coin dropped 44% and Dogecoin lost 21%.
Volatility erupted in crypto-land last week when Tesla Inc.’s Musk retracted plans to accept Bitcoin for his company’s cars. Selling resumed on the weekend when Musk seemed to suggest Tesla might want to sell its corporate holdings, but reversed after he tweeted that the carmaker had no plans to do so. A statement from the People’s Bank of China on Tuesday reiterating that digital tokens can’t be used as a form of payment added to the selloff.
While all were proximate causes for the rout, nothing could explain the frantic rout Wednesday morning, when the coin dropped thousands of dollars in price in a matter of minutes. Selling gave way to more selling as investors lured into crypto in search of a quick buck bolted for the exits. The selling accelerated when Bitcoin fell below its average price for the past 200 days.
Chart-watchers pointed to key technical levels that have failed.
Cryptocurrency-linked stocks also dropped, with Coinbase Global Inc. falling 5.2% in U.S. premarket trading and Marathon Digital Holdings Inc. slumping 12%.
Bitcoin embarked on a multi-month rally following Tesla’s February announcement, soaring to its $64,870 peak, in large part due to the company’s embrace.
Wiped Out
At the time, Tesla’s acceptance was hailed as a watershed moment for the coin, with many in the crypto world seeing it as yet another step in its evolution.
All that’s been wiped out after Musk sent investors into a tizzy following a mass of head-spinning tweets that started last week when he criticized Bitcoin’s energy use.
“Realistically, it is not the first time Elon Musk’s tweets have been erratic and, frankly, wrong,” said Ulrik Lykke, executive director at crypto hedge fund ARK36. “The crypto markets are extremely emotionally driven and their participants are prone to overreacting to events they perceive as negative.”
(Updates prices throughout)
More stories like this are available on bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.
