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Cryptocurrencies

'Cryptocrash' sparks broad stock sell-off after Chinese crackdown

Trading platforms seize up as bitcoin falls to half of all-time high

Bitcoin hit an all-time high of $64,801 in April before descending into a free fall in recent weeks.   © Reuters

NEW YORK -- U.S. stocks took a wild ride on Wednesday, setting up a potentially volatile day in Asian trading after China's regulatory crackdown on cryptocurrencies erased billions of dollars from the value of bitcoin and other digital money.

The Dow Jones Industrial Average fell by as much as 580 points, or 1.7%, in a broad sell-off in early trading, but narrowed its losses to close at a 0.48% decline. The S&P 500 dropped 0.29%, while the Nasdaq was little changed.

Bitcoin plunged to $30,201 at one point Wednesday, according to CoinDesk. The low was less than half the value of an all-time high of $64,801 reached in April.

Cryptocurrency peers such as Ethereum, Ripple and Dogecoin dropped by as much as 20% to 40% from the previous session.

What is being dubbed the "cryptocrash" follows new restrictions enacted in China. The China Banking Association and other industry groups issued a notice Tuesday instructing financial groups not to offer services involving cryptocurrencies.

This news came on top of Tesla CEO Elon Musk revealing last week that the automaker will stop accepting bitcoin for its electric vehicles. These factors touched off a round of profit-taking by speculators while others dumped cryptocurrencies at a loss.

Cryptocurrency volatility on Wednesday mounted to the point that multiple trading platforms malfunctioned around 9 a.m. Eastern time. U.S.-based Coinbase was forced to halt trading temporarily. Japan's biggest exchange, bitFlyer, suffered a brief connection failure as well.

The value of bitcoin bottomed out after 10 a.m., climbing above $37,000. But the damage had already been done to U.S. equities exposed to the virtual currency. Shares in Coinbase took a 13% dive at the start of trading Wednesday. The company plumbed the lowest point since its Nasdaq debut in April, falling more than 40% below the initial price.

Tesla and Square, a mobile payments startup that also has invested in bitcoin, were each off by more than 5% at one point Wednesday.

Bitcoin collapsed in a similar way from 2017 to 2018, as well as in March last year. This year, the pool of bitcoin holders has grown amid the dramatic gains in value. Many investors are believed to have suffered drastic losses, and the aftermath could be larger than before.

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