Crypto-related stocks tumble as sell-off deepens

Coinbase and MicroStrategy open down by more than 12% and 14% respectively

Cryptocurrency-related stocks tumbled on Wednesday, as the digital asset market reeled from the news that China has banned financial institutions and payment companies from providing services related to cryptos.

Bitcoin plunged by as much as 25% on the news, falling as low as $32,109, with Ethereum, Litecoin and XRP suffering even more substantial drops.

Consequently, Coinbase Global, the prominent US cryptocurrency exchange that listed in April, opened down by more than 12% at $210.08. The company’s share price has fallen by more than 36% since its market debut.

China tightens cryptocurrency restrictions

A joint statement by three state-backed organisations in China argued that “virtual currencies are not supported by any real value” and claimed that recent volatility in the cryptocurrency market seriously infringed on “the safety of people’s property” and “the normal economic and financial order”.

In the six days leading up to the Tuesday announcement, the capitalisation of the total crypto market had fallen by more than $500bn. Although this metric was trading at an all-time high of $2.5trn and was potentially due a correction, the size of the pullback can be largely attributed to one man, Elon Musk.

The Tesla Motors CEO criticised the energy consumption associated with Bitcoin mining and at one point even hinted to his 55 million Twitter followers that he might dump his company’s substantial holding.

In February, the electric vehicle maker joined the trend of publicly traded companies adding Bitcoin to their balance sheets, purchasing a $1.5bn holding. Tesla traded down 4% at $554.58 after the opening bell.

MicroStrategy CEO remains resolutely pro-Bitcoin

MicroStrategy suffered one of the worst declines among crypto-related companies in the wake of the market sell-off, opening Wednesday down 14.8% at $415.

The business intelligence firm was one of the first companies to add Bitcoin to its balance sheet in 2020 and saw its share price surge as high as $1,315 during the crypto’s January surge.

Unfazed by Wednesday’s sell-off, MicroStrategy CEO and founder Michael Saylor maintained his long-term Bitcoin bullishness, stating he would not be selling and tweeting:

“Entities I control have now acquired 111,000 #BTC and have not sold a single satoshi.  #Bitcoin Forever.”

Further reading: China bans financial institutions and payment firms from servicing crypto transactions

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