Bitcoin fell 14% to $ 51,541 on Sunday amid unconfirmed speculation on Twitter that the U.S. Treasury could crack down on money laundering carried out through the cryptocurrency.
The sell-off meant that the cryptocurrency wiped out most of the big gains it had made over the past week.
The latest drop meant it was trading at $ 53,991, $ 12,000 below the record over $ 64,800 set on Wednesday.
Smaller rival Ether, the coin linked to the Ethereum blockchain network, fell 10% to $ 2,101.
Bitcoin fell 14% to $ 51,541 on Sunday morning, reversing most of the gains from a record week that saw it soar to highs above $ 64,800 on Wednesday.
According to Bloomberg, Binance Coin, XRP and Cardano each lost more than 12%, while Dogecoin, which is the token started as a joke, was the only winner among the 10 biggest coins.
Several online reports attributed the recession to rumors that the US Treasury could crack down on money laundering carried out through digital assets.
A tweet from the @Fxhedgers account that went viral stated: “US TREASURY TO CHARGE MULTIPLE FINANCIAL INSTITUTIONS FOR MONEY LAUNDERING USING CRYPTOCURRENCIES -SOURCES. “
The US Treasury has not commented and it is not clear whether there is any veracity to the rumor cited by some traders.
The price drop came after a record week for the cryptocurrency. Ahead of Coinbase Global Inc’s IPO on Wednesday, the value of all coins has surpassed $ 2.25 trillion amid a buying spree.
Founded in 2012, Coinbase has become popular among cryptocurrency fans by providing them with an easier way to trade shares of Bitcoin and other digital currencies.
Unlike many newly opened businesses, Coinbase is profitable, with an estimated net profit of between $ 730 million and $ 800 million in the first quarter.
Data website CoinMarketCap cited a power outage in China’s Xinjiang region, which is believed to fuel much of bitcoin mining, as the reason for the sale.
The world’s largest cryptocurrency fell 10% on Sunday at 7:20 a.m. KST. It was trading at $ 53,991, which is $ 12,000 below the highs above $ 64,800 set on Wednesday.
Luke Sully, CEO of digital asset treasury specialist Ledgermatic, said in an email that people “may have sold the news of the power outage in China and not the impact it actually had. on the network ”.
He added: “The power failure reveals a fundamental weakness; that although the Bitcoin network is decentralized, its mining is not.
Some widely followed blockchain analysts on Twitter pointed to a sharp drop in the “hash rate” due to the outage.
The hash rate refers to the volatility index which measures the processing capacity of the entire Bitcoin network and determines the power required by miners to produce new Bitcoins.
“Typically, hash rate shocks don’t cause the price to drop,” said Edan Yago, co-founder of Bitcoin-based Decentralized Funding Protocol Sovryn. “A reduction in the hash rate slows down transactions, which ironically makes it more difficult to transfer coins to exchanges for sale.
Tweet that went viral claimed US Treasury could crack down on money laundering through digital assets
The price drop came after a record week for the cryptocurrency. Ahead of Coinbase Global Inc’s IPO on Wednesday, the value of all coins has exceeded $ 2.25 trillion
He added, “The recent drop in prices is well within typical volatility, it’s noise and not a signal. ”
Bitcoin’s pullback also comes after Turkey’s central bank banned the use of cryptocurrencies for purchases on Friday.
Edward Moya, senior market analyst at OANDA, said cryptocurrencies were ripe for a pullback.
“The market has become too aggressive and bullish on everything,” said Edward Moya. “It could have been any bearish title that could have triggered that reaction. “
Many cryptocurrency markets operate 24/7, paving the way for price fluctuations at unpredictable times. Historically, retail and day traders have led the moves.
Despite the sudden sell-off, bitcoin is still up 89% so far in 2021, due to its widespread acceptance as an investment and a means of payment, accompanied by the rush of retail cash to stocks, exchange traded funds and other risky assets.