By Barbara Kollmeyer
Bitcoin and other cryptocurrency prices tumbled on Tuesday, after a sharp warning from Treasury Secretary Janet Yellen.
“It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen said in an interview with the New York Times’ Dealbook late on Monday. It isn’t the first time she has criticized the cryptocurrency, which she said is often used for illegal transactions.
However, Yellen, also said digital currencies were likely here to stay and that a “digital dollar” could serve as an easier payment system for many Americans who don’t have that access.
The price of bitcoin /zigman2/quotes/31322028/realtime BTCUSD +3.46% was last down 16% to $45,658, a level it hasn’t seen in more than a week, with its year-to-date return now at 57%. Losses weren’t limited to bitcoin, with prices of ether, the currency that runs atop the ethereum /zigman2/quotes/108573964/realtime ETHUSD +2.94% platform, off 21% and for XRP /zigman2/quotes/108573966/realtime XRPUSD +17.07% , which is pegged to Ripple, down 27%.
The former Federal Reserve chair has made clear since taking over the Treasury that her department will take a close look at bitcoin, with possible regulation to come.
She’s only a “temporary game-stopper,” said Stephen Innes, chief global markets strategist at Axi, in a note to clients. “Besides the enormous Middle East consortium interest in the bitcoin ETF trading on the Toronto exchange that needs to hedge physical, but if corporates start to add physical coins to the balance sheet this year, that is the game-changing panacea,” he said.
Bitcoin recently topped a $1 trillion in market value for the first time, and big moves seen this year have drawn in more investors and interest from companies such as electric-car maker Tesla /zigman2/quotes/203558040/composite TSLA -0.99% , which revealed earlier this month a $1.5 billion investment in bitcoin and plans to accept it as payment in future. And credit-card giant Mastercard /zigman2/quotes/207581792/composite MA +0.62% has also said it would allow merchants to accept some cryptocurrencies on its network later this year.
But bitcoin had volatile start to the week, dropping on Monday in a move that some blamed on Tesla /zigman2/quotes/203558040/composite TSLA -0.99% Chief Executive Elon Musk. Over the weekend, he tweeted that “BTC & ETH do seem high lol” in response to Euro Pacific Capital Chief Executive Peter Schiff, who defended gold over bitcoin. “Gold is not BS. It’s real money and better than both!”
“Musk may have spooked some participants with his tweet saying the price was ‘too high’. But I feel that was an in-joke for followers. More importantly the market was ripe for a sharp technical pullback after a parabolic move, the kind that usually comes down under its own weight,” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.
That back-and-forth between Musk and Schiff continued on Tuesday, with the latter criticizing the electric-car CEO’s bitcoin approach. Musk responded with an eggplant emoji, which some inferred was his way of dismissing the comment. That emoji was banned by social media group Facebook on its Instagram unit over phallic symbolism and foods.