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Bitcoin’s price dropped further on Tuesday after U.S. Treasury Secretary Janet Yellen issued a warning about the cryptocurrency.
The world’s most valuable digital currency has plunged 16% in the past 24 hours, falling below $ 50,000 to a low of $ 45,389 at 4:10 am ET, according to data from Coin Metrics.
On Monday, Yellen called bitcoin “an extremely inefficient way of transacting” and warned about its use in illicit activities. She also raised the alarm about the impact of bitcoin on the environment. The wild wave of the token reminded some critics of the absolute level of electricity needed to produce new coins.
Bitcoin is not controlled by any central authority. So-called miners operate high-powered machines that compete to solve complex mathematical puzzles in order to get a transaction done. The Bitcoin network consumes more electricity than Pakistan, according to an online tool by researchers at Cambridge University.
Yellen also warned of the risks of investing in bitcoin for retail investors on Monday.
“It is a highly speculative asset and you know that people should be aware that it can be extremely volatile and I am concerned about the potential losses that investors may suffer,” former Federal Reserve chairman told CNBC Andrew Ross Sorkin in a DealBook from the New York Times conference.
Bitcoin has still risen more than 60% since the beginning of the year, and price swings of more than 10% are not uncommon in the crypto markets. Bitcoin has already risen to almost $ 20,000 in 2017, before losing 80% of its value the following year.
The digital currency reached $ 1 trillion in market value for the first time last week – although it has now dropped to less than $ 900 billion, according to CoinDesk. He gained a boost with news from Wall Street banks and big companies like Tesla and Mastercard getting excited about cryptocurrencies.
Tesla CEO Elon Musk said over the weekend that prices for bitcoin and rival ether token “look high.” It came after Tesla’s announcement earlier this month that it had bought $ 1.5 billion in bitcoin. Tesla’s shares suffered their biggest drop since September 23, 2020 on Monday.
Bitcoin has attracted conventional investors, partly due to the perception that it is a store of value similar to gold. Optimistic investors say the cryptocurrency can act as a hedge against rising inflation.
But skeptics warn that bitcoin has no intrinsic value and is one of the largest market bubbles in history. JPMorgan analysts said last week that bitcoin is an “economic show” and that crypto assets are classified as the “weakest hedge” against significant stock declines.