(NEXSTAR/AP) – Digital currencies briefly went into freefall in early trading Wednesday after China’s banking association issued a warning over the risks associated with digital currencies.
A statement posted on the industry association’s website said all members should “resolutely refrain from conducting or participating in any business activities related to virtual currencies.”
Bitcoin dropped below $40,000 for the first time in more than 3 months, as Wednesday’s declines added to the selling that followed critical comments from Elon Musk. Musk’s Tesla electric car maker shifted away from accepting Bitcoin last week.
Bitcoin’s price was down 19% at one point Wednesday to just over $35,000, according to the crypto news site Coindesk, well below the recent high of over $63,000 it reached in mid-April. The currency had recovered slightly by the time of publication. This comes after longtime Bitcoin advocate Tesla recently said it would no longer accept Bitcoin as payment for its cars, reversing its earlier position.
Ethereum, another heavily watched crypto, was down more than 35% this week as of Wednesday morning, according to the trading app Robinhood. Ethereum and related forks, such as Ethereum classic, had seen values multiply over the last three months. Selling this week has given up some of those gains, but Ethereum still remains up roughly 50% since February, according to Robinhood.
The selling was so intense that the website of Coinbase, an online brokerage for digital currencies, was down in the morning, and getting pricing on some currencies was difficult. Coinbase’s stock dropped 8%, and was down 36% Wednesday from the peak it reached on April 16, just two days after its IPO.
On the broader stock market, investors also continue to be focused on whether rising inflation will be temporary or whether it will endure. Prices are rising for everything from gasoline to food as the economy recovers from its more than year-long malaise.
The fear is that the Federal Reserve will have to dial back its extensive support if inflation persists. That includes record-low interest rates and the monthly purchase of $120 billion in bonds meant to goose the job market and economy. For all the worries about inflation, however, many professional investors are echoing the Federal Reserve in saying that they expect rising prices to be “transitory.”