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Bitcoin falls below $ 40,000 after China issued a warning on cryptocurrency transactions

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Bitcoin has seen a drastic change after fallen below $ 40,000 for the first time in more than three months on Wednesday.

This unparallel change happened after China said that cryptocurrencies would not be allowed in transactions and warned investors against speculative trading with them.

The comments caused the value of the cryptocurrency to drop more than 10 percent. This would be another blow shortly after the one suffered following comments from tycoon Elon Musk and his car company Tesla.

Cryptocurrency trading has been banned in China since 2019 to prevent money laundering, as leaders try to prevent people from moving cash abroad. The country had hosted around 90 percent of the sector’s world trade.

And in a statement, three state-backed industry associations, the China National Internet Finance Association, the China Banking Association, and the China Payments and Clearing Association, said that “cryptocurrency prices have rocketed and tumbled, and speculative activities with cryptocurrency trading rebounded. ”

Price fluctuations “seriously violate the security of people’s assets and disrupt the normal economic and financial order,” said the statement, which was posted on social media by the People’s Bank of China.

The Chinese authorities warned consumers against wild speculation, adding that “losses caused by investment transactions are borne by consumers themselves,” as Chinese law does not offer them protection.

They reiterated that providing cryptocurrency-based financial products and services to customers was illegal for Chinese financial institutions and payment providers.

Bitcoin fell from $ 45,600 to $ 39,240 on Wednesday, its lowest level since early February, and well below last month’s record of $ 64,870. Analysts have warned that it could go as low as $ 30,000.

” This is the latest chapter of China tightening the rope around cryptocurrencies,” said Antoni Trenchev, managing partner and co-founder of London-based cryptocurrency lender Nexo.

And Saxo Markets’ Adam Reynolds added: “It comes as no surprise to me as Chinese capital controls can be challenged by purchases of cryptocurrencies in the country and transfers out of the country.”

“Therefore, avoiding its use in the country is essential to maintain capital controls.”

Bitcoin has had a turbulent few days. It took a heavy hit earlier in the week after Musk appeared to suggest that Tesla was planning to sell its huge holdings of the unit . And that came days after the electric car giant said it would stop using it in transactions due to environmental concerns.

China is in the midst of extensive regulatory crackdown on its fintech sector, whose major players, including Alibaba and Tencent, have been hit with large fines after being found guilty of monopolistic practices.

The central bank has also sought to promote its own heavily regulated digital yuan , which it is testing across the country in pilot schemes.

Mobile and online payments are already widely used by consumers, but the digital yuan could allow the central bank, rather than the big tech giants, to have more data and control over payments.

With information from AFP

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