Bitaigen Research In this article we untangle the recent regulatory policy upheavals and industry discourse, explain why digital assets experienced extreme volatility within just two days, and explore the possible systemic risks behind the moves. If you want to understand the key drivers of the crypto‑market collapse and the outlook ahead, keep reading for a complete perspective.
Financial Regulators Speak Up, Virtual‑Asset Risks Highlighted Again
At the beginning of the year, as Bitcoin, Ethereum and other major cryptocurrencies kept climbing, market enthusiasm surged, even fueling the meteoric rise of low‑market‑cap tokens such as Dogecoin and Shiba Inu after being championed by “the king of promotion” Elon Musk. Rumors once claimed that Binance’s daily turnover could approach 1 trillion USD, surpassing the total volume of the Shanghai and Shenzhen stock exchanges.
However, on the evening of May 18, three major Chinese bodies—the Internet Finance Association, the Banking Association, and the Payments & Clearing Association—jointly issued the “Announcement on Preventing Speculative Risks in Virtual‑Currency Trading.” The notice explicitly requires member institutions to:
- Prohibit products and services priced in virtual currencies;
- Refrain from underwriting or including virtual currencies within any insurance coverage;
- Not provide any form of virtual‑currency‑related service to customers.
The document further points out that virtual currencies are not issued by monetary authorities, lack legal tender status and compulsory acceptance, and therefore cannot function as legal money in the market. Activities such as fiat‑to‑virtual‑currency exchange, acting as a central counter‑party, providing information intermediation, issuing token‑based financing, or trading derivatives are deemed potentially in violation of current regulations and may constitute illegal fundraising, illegal securities issuance, and other crimes.
On the same day, Inner Mongolia launched a reporting platform targeting virtual‑currency “mining” enterprises. The public can submit leads concerning four categories of entities involved in mining, site leasing, and related activities, further tightening regulatory oversight.
Market Plummets: Over 2 trillion USD of Market‑Cap Wiped Out in Two Days
Under the combined pressure of regulatory warnings and public sentiment, digital‑asset prices retreated sharply in a short span. Today, Bitcoin breached the $39,000 threshold, posting a 24‑hour decline of more than 14 %, touching a low of $38,600, roughly a 40 % drop from its April all‑time high. Ethereum followed suit, slipping below $2,900 with a decline exceeding 17 %; Binance Coin and Dogecoin each fell about 22 % during intraday trading.
Data from the AICoin platform shows that in the past 24 hours the total cryptocurrency market cap shrank by nearly 2 trillion USD, falling to $11.62 trillion. Statistics from Bitcoin.com indicate that about 220,000 investors were forced into liquidation during the same period, incurring a cumulative loss of roughly 12.2 billion CNY (≈ $1.7 billion USD). Since May 12, the total number of liquidated accounts has reached several hundred thousand, involving more than 50 billion CNY (≈ $7 billion USD) of capital.
Institutional Viewpoint: Multiple Factors Weaken Bitcoin
William, chief researcher at the OKEx Research Institute, analyzed the current market and argued that Bitcoin’s continued decline is not accidental but the result of three converging forces:
- Profit‑taking pressure – Since March 2023, Bitcoin has gained over 1,600 % cumulatively, creating a large pool of profitable positions held by institutions and retail investors that now face redemption demands.
- Macroeconomic policy uncertainty – Although the U.S. Federal Reserve maintains an accommodative stance, market anxiety over runaway inflation has risen, boosting risk‑off sentiment.
- Regulatory‑signal shock – The joint warning from the three Chinese associations further eroded confidence, prompting a rapid outflow of capital.
William also noted that Bitcoin has entered a weak regime and shows no clear bottom‑fishing signs in the short term.
Musk’s Remarks Shake the Market: From “Promotion King” to “Defector”
During the first half of the year, Tesla CEO Elon Musk repeatedly praised Bitcoin, Dogecoin and other tokens on social media. His personal brand amplified price rallies: Bitcoin once touched $64,843, a gain of over 70 %, while Dogecoin surged 260‑fold within six months.
On the morning of May 13, Musk announced that Tesla would suspend acceptance of Bitcoin payments, citing concerns about the energy consumption and environmental impact of mining. Tesla clarified that it does not intend to sell its existing Bitcoin holdings and would resume acceptance once mining operations adopt more renewable energy.
The announcement triggered wild market swings: Bitcoin fell more than $10,000 in a single day, with a 24‑hour decline close to 15 %; Ethereum dropped over 10 %; Ripple, Shiba Inu, Dogecoin and others also slipped. Within 24 hours, the number of liquidated accounts rose to 302,500, with losses exceeding 23.8 billion CNY (≈ $3.3 billion USD).
In the early hours of May 17, Musk hinted on Twitter that Tesla might have already sold part of its Bitcoin stash. Bitcoin subsequently slipped another >10 %, bottoming at $42,212. He later clarified that no sale had taken place; the price rebounded briefly by about $2,500 but failed to reclaim its previous level. Industry insiders generally view each of Musk’s public statements as a potential catalyst for short‑term market volatility.
Options‑Market Signals: Bitcoin Could Test the $35‑40 k Zone
After Bitcoin slipped below $40,000, sentiment in the derivatives market turned decidedly bearish. Pankaj Balani, CEO of Delta Exchange, disclosed that recent trading volume in $40,000 put options has been unusually high, indicating that investors are actively trimming long positions. Balani said, “We are not seeing clear bottom‑fishing activity; the market broadly expects Bitcoin to stay under pressure, with the $35,000‑$38,000 range becoming the focal point for many traders.”
He further projected that, before June, Bitcoin’s price could oscillate between $35,000 and $50,000.
Summary
In the past two days, the crypto market has been battered by regulatory warnings, statements from industry titans, and macro‑economic headwinds, erasing more than 2 trillion USD in total market value and driving a surge in liquidation events. Major coins such as Bitcoin have broken through key support levels, and sentiment has shifted to extreme caution. In the coming weeks, regulatory developments and remarks from large holders will continue to shape price dynamics; investors should remain risk‑aware and evaluate asset allocation rationally.
For more in‑depth analysis of the recent turbulence in the crypto space, stay tuned to Bitaigen’s (Bitcoin‑Root) follow‑up reports.
Related Reading
- How to Play Bitcoin for Profit: Earn Money with Crypto
- Ethereum vs Bitcoin: Key Differences in Positioning, Consensus & Ecosystem
- Understanding Bitcoin Dumps: Why Whales Trigger Price Swings
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⚠️ Risk Disclaimer: Crypto prices are highly volatile. This is not investment advice.
