Bitcoin plunged the most in more than seven weeks, just days after reaching a record.
The biggest crypto coin was down 9% to $55,323 at around 9:30 a.m. in New York on Sunday, after declining as much as 15% to $51,707 in the Asian day.
Other cryptocurrencies suffered as well. Ether, the second-biggest, dropped as much as 18% to below $2,000 before paring losses. The total market cap of crypto, which recently surpassed $2 trillion, fell back to about $1.96 trillion, according to data from CoinGecko.com. And Dogecoin, the coin started as a joke in 2013, was recently trading around 29 cents after hitting 40 cents on Friday.
Several online reports attributed the plunge to speculation the U.S. Treasury may crack down on money laundering that’s carried out through digital assets.
Bitcoin hit a record high of $64,869 last week ahead of the debut trade for the cryptocurrency exchange Coinbase Global Inc. on the Nasdaq exchange Wednesday. Coinbase ended its first trading week on a high note after bullish reviews from Wall Street analysts.
Dogecoin, which has been boosted by the likes of Elon Musk and Mark Cuban, rallied more than 110% Friday before dropping the next day. Demand was so brisk for the token that investors trying to trade it on Robinhood crashed the site, the online exchange said in a blog post Friday.
“The crypto world is waking up with a bit of a sore head today,” said Antoni Trenchev, co-founder of crypto lender Nexo. “Dogecoin’s 100% Friday rally was ‘peak party,’ after the Bitcoin record and Coinbase listing earlier in the week. Euphoria was in the air. And usually in the crypto world, there’s a price to pay when that happens.”
Besides the “unsubstantiated” report of a U.S. Treasury crackdown, Trenchev said factors for the declines may have included “excess leverage, Coinbase insiders dumping equity after the direct listing and a mass outage in China’s Xinjiang province hitting Bitcoin miners.”
Growing mainstream acceptance of cryptocurrencies has spurred Bitcoin’s rally, as well as lifting other tokens to record highs. Interest in crypto went on the rise again after companies from PayPal to Square started enabling transactions in Bitcoin on their systems, and Wall Street firms like Morgan Stanley began providing access to the tokens to some of the wealthiest clients. That’s despite lingering concerns over their volatility and usefulness as a method of payment.
Governments are inspecting risks around the sector more closely as the investor base widens.
Federal Reserve Chairman Jerome Powell last week said Bitcoin “is a little bit like gold” in that it’s more a vehicle for speculation than making payments. European Central Bank President Christine Lagarde in January took aim at Bitcoin’s role in facilitating criminal activity, saying the cryptocurrency has been enabling “funny business.”
Turkey’s central bank banned the use of cryptocurrencies as a form of payment from April 30, saying the level of anonymity behind the digital tokens brings the risk of “non-recoverable” losses. India will propose a law that bans cryptocurrencies and fines anyone trading or holding such assets, Reuters reported in March, citing an unidentified senior government official with direct knowledge of the plan.
Crypto firms are beefing up their top ranks to shape the emerging regulatory environment and tackle lingering skepticism about digital tokens. Bitcoin’s most ardent proponents see it as a modern-day store of value and inflation hedge, while others fear a speculative bubble is building.