Cryptocurrency stocks often move in tandem with bitcoin’s price. Bitcoin hit $39,746 on Monday – the highest point in over two weeks – after Elon Musk tweeted Tesla would accept the cryptocurrency as payment again once the energy used for mining shifts to more sustainable sources.
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” the electric-vehicle maker CEO said in a tweet.
Bitcoin was trading 9.44% higher around $39,310 on Monday as of 8:30 a.m. ET.
Other crypto-focused names were trading higher Monday, with blockchain technology company Ebang holdings up 4.12% and mining company Bit Digital up 5.43%.
Michael Saylor’s Microstrategy, which just “bought the dip” in bitcoin with $10 million at an average price of $43,663 per coin, was down as much as 15% on the day.
Grayscale Bitcoin Trust sank more than 6% on Wednesday as well, and even Tesla saw its stock drop more than 3% on the dark day for cryptocurrency enthusiasts.
Cryptocurrencies as a whole saw roughly 15% wiped off their total market cap on the day, according to data from CoinMarketCap.com, as altcoins fell in tandem with crypto leaders bitcoin and ethereum.
All of the top ten cryptocurrencies by market cap, except the stablecoins, fell double digits on Wednesday.
The cryptocurrency bear market began on May 12, when Elon Musk tweeted that Tesla would no longer accept bitcoin as a payment method due to the environmental impact of its computational mining tactic for minting new coins.
Then on Tuesday, the Chinese government reinforced its previous ban on financial institutions and payments companies operating in the cryptocurrency business.
The National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China said in a statement that cryptocurrencies “are not supported by real value” and argued speculative trading of cryptocurrencies is “seriously infringing on the safety of people’s property and disrupting the normal economic and financial order.”
The historic single-day fall for cryptocurrencies comes just a day after Galaxy Digital’s Mike Novogratz shrugged off the recent crypto-slump.
“It’s easy to get buried in the volatility of the day,” Novogratz said, according to a transcript on Sentieo, a financial-research site. “Elon Musk’s Twitter comments, bitcoin going down 4,000 points, and everyone starts running around like chickens with their head cut off.”
Novogratz said he expects the total value of crypto assets to triple, or even quadruple, to between $6 trillion and $8 trillion in the coming years.
Shares of the largest public cryptocurrency-mining companies have outperformed bitcoin in the past 12 months and could continue to do so as bitcoin and the wider cryptocurrency market represent the “modern-age digital gold rush,” Fundstrat’s Leeor Shimron said.
“Over the past year, they greatly outperformed Bitcoin, which accelerated when the $20,000 all-time high was breached,” Shimron said. “We expect this dynamic to continue as the bull market plays out.”
Riot Blockchain, for example, has gained roughly 8,000% over the past year, while bitcoin has rallied about 525%.
Shimron also said the mining companies had taken steps to capture the growth of the bitcoin bull run, such as investing in efficient hardware and upgrading machines to increase operating leverage and hashrate capacity.
However, investors should be aware that buying shares of mining companies may be risky, with massive upside potential but also the potential for magnified losses during bitcoin’s bear markets.
“Although there is not enough historical data to confirm, mining company equities may serve as a high-beta play on Bitcoin,” Shimron said. “This would magnify performance to the upside and downside for these types of stocks. Clearly their performance is tied to the price of Bitcoin, but they may deliver amplified returns during a bull market. We are seeing this play out in the current market cycle. When Bitcoin enters a bear cycle, we would expect mining equities to have greater downside volatility than Bitcoin.”