$270 billion wiped off crypto market as bitcoin falls below $40,000 for first time in 14 weeks

The announcement to suspend bitcoin payment came just three months after Tesla revealed that it bought $1.5 billion worth of bitcoin, and would start accepting bitcoin in exchange for its products.

Early this week, the Tesla CEO suggested the company may have sold its bitcoin holdings but later clarified that it has “not sold any Bitcoin.”

Then on Tuesday, three Chinese banking and payment industry bodies issued a statement warning financial institutions not to conduct virtual currency related business, including trading or exchanging fiat currency for cryptocurrency.

China’s hard line on digital currencies is not new. In 2017, authorities shut down local cryptocurrency exchanges and banned so-called initial coin offerings (ICOs), a way for companies in the space to raise money through issuing new digital tokens.

Traders in China once accounted for a huge share of the bitcoin market but after the crackdown, their influence was reduced significantly. Chinese cryptocurrency operations have moved abroad.

Bitcoin is still up 40% year-to-date and more than 300% in the last 12 months.

Other cryptocurrencies also plunged. Ether, the digital currency that powers the Ethereum blockchain, was down nearly 16% at $2,960.29 at 4:30 a.m. ET. Dogecoin, a cryptocurrency that started as a joke and has been talked up by Musk, fell 16% to $0.4189.

Around $270 billion had been wiped off the entire value of the cryptocurrency market in 24 hours as of 4:30 a.m. ET.

Bitcoin is off by about 38% from its all-time high of $64,829.14 which was hit in mid-April.

Vijay Ayyar, head of business development at cryptocurrency exchange Luno, said that a 30% to 40% pullback is “normal” during bitcoin bull markets.

“So this is very much expected after we topped out at 64K ($64,000),” he said.

Ayyar pointed to a roughly 35% correction in January as well as similar falls during the huge run-up in bitcoin’s price in 2017.

“We are definitely close to a bottom” around $38,000 to $40,000, he said.

Bitcoin bull Mike Novogratz told CNBC on Tuesday that he sees $40,000 as a buying level for the digital currency. The investor, who runs cryptocurrency financial services and investment management Galaxy Digital, said he expects bitcoin to consolidate in a trading range between $40,000 to $55,000.

“Then we’ll have another leg up. And I say that not just by guessing. We see institutions moving in, and it takes them a while,” Novogratz said.