Under the title "Cryptocurrency Loses $600 Billion in a Week," the Al Arabiya website reported that the value of over 7,000 cryptocurrencies tracked by CoinGecko decreased by more than $600 billion in the past week, down to $1.9 trillion. Bitcoin, the largest cryptocurrency, fell by about 11% on Wednesday to below $40,000. Cryptocurrencies managed to recover today, Thursday, after sharp losses yesterday, trading above the $40,000 level.
The recent severe declines can be attributed to several factors, ranging from criticisms of the environmental impact caused by Bitcoin's energy consumption by former cryptocurrency supporter Elon Musk to regulatory pressure concerns from both the U.S. and China. Jeffrey Halley, a senior market analyst at OANDA, noted in a statement that the $40,000 level is a "critical pivot point for Bitcoin," suggesting that a drop to slightly below $30,000 is not out of the question.
Negative news over the past week weakened sentiment toward cryptocurrencies. On May 12, Tesla CEO Elon Musk announced that the electric car manufacturer had suspended vehicle purchases using Bitcoin, citing environmental concerns regarding the so-called computational "mining" process, where high-power computers solve complex mathematical puzzles to enable transactions using Bitcoin.
In new statements from the People's Bank of China, it was announced that cryptocurrencies "should not and will not be used as a means of payment, as they are not real currencies," emphasizing that financial institutions and payment companies should not price their products in cryptocurrencies. Following this, Bitcoin dropped to $30,066, its lowest level since late January, before bouncing back above $35,000.
The losses included a significant number of digital currencies, with Ethereum dropping 15% to $2,960, Bitcoin Cash down 16%, and Cardano falling 15%. This comes after the total value of cryptocurrencies surpassed $2 trillion for the first time in early April, where the market capitalization of crypto assets had doubled in about two months amid optimism shown by institutional investors with increased interest in cryptocurrencies. The recent decline has erased more than $600 billion from this value.
