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The price of Bitcoin dropped further on Tuesday after US Treasury Secretary Janet Yellen issued a warning about the cryptocurrency.
The world’s most valuable digital currency plunged 16% in the past 24 hours, sinking below $ 50,000 to trade as low as $ 45,389 as of 4:10 a.m. ET, according to data from Coin Metrics.
On Monday, Yellen called bitcoin an “extremely inefficient way to transact” and warned against its use in illicit activities. It also sounded the alarm about bitcoin’s impact on the environment. The token’s wild surge has reminded some critics of the sheer level of electricity required to produce new coins.
Bitcoin is not controlled by any central authority. The so-called miners operate high-powered machines that compete to solve complex mathematical puzzles in order to make a transaction go through. The Bitcoin network consumes more electricity than Pakistan, according to an online tool from researchers at the University of Cambridge.
Yellen also warned about the risks of investing in bitcoin for retail investors on Monday.
“It is a highly speculative asset and you know that I think people should be aware that it can be extremely volatile and I am concerned about the potential losses investors may suffer,” former Federal Reserve chairman told CNBC’s Andrew Ross Sorkin in a New York Times DealBook. conference.
Bitcoin is still up more than 60% since the beginning of the year, and price swings of more than 10% are not a rarity in crypto markets. Bitcoin once climbed to almost $ 20,000 in 2017 before losing 80% of its value the following year.
The digital currency reached a market value of $ 1 trillion for the first time last week, although it has now sunk below $ 900 billion, according to CoinDesk. It’s gotten a boost from the news that Wall Street banks and big companies like Tesla and Mastercard are warming up to cryptocurrencies.
Elon Musk, CEO of Tesla, said over the weekend that the prices of bitcoin and rival ether token “look high.” It comes after Tesla’s announcement earlier this month that it had bought $ 1.5 billion in bitcoins. Tesla shares suffered their biggest drop since Sept. 23, 2020, on Monday.
Bitcoin has been gaining traction from major investors, in part due to the perception that it is a store of value similar to gold. Optimistic investors claim that 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. Analysts at JPMorgan said last week that bitcoin was an “economic spectacle” and that crypto assets are ranked as the “poorest hedge” against significant declines in stocks.