Bitcoin leads cryptocurrency sell-off after Trump calls it a 'scam'

Watch:Trump calls Bitcoin a ‘scam against the dollar’ that needs to be ‘very high regulated’

Cryptocurrencies continue a bout of volatility as they plunged on Tuesday morning, after former US president Donald Trump said bitcoin was a "scam".

“Bitcoin, it just seems like a scam,” he told Fox Business. “I don’t like it because it’s another currency competing against the dollar… I want the dollar to be the currency of the world. That’s what I’ve always said.”

In 2019 when he was president, he had said he was “not a fan” of cryptocurrencies.

In a tweet, he had said at the time cryptos “facilitate unlawful behaviour, including drug trade and other illegal activity”.

Trump's comments "do seem to have affected sentiment in the short term, but looking even slightly further ahead they're likely to be forgotten," Michael Stark, research analyst at trading platform Exness told Yahoo Finance.

"The former president's claim that bitcoin is 'another currency competing against the dollar' in particular reflects a lack of understanding given that bitcoin is seldom used as a currency but a hedge against inflation and a store of value," he said.

Former US president Donald Trump said he doesn't like bitcoin 'because it’s another currency competing against the dollar.' Photo: AP
Former US president Donald Trump said he doesn't like bitcoin 'because it’s another currency competing against the dollar.' Photo: AP

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"The key factor affecting crypto markets still seems to be whales' activity around important supports."

Meanwhile, Simon Peters, analyst at multi-asset investment platform eToro, said: "Ironically, his statement gives credence to crypto’s existence, by calling it out as a threat to the dominance of the US dollar."

By Tuesday afternoon, bitcoin (BTC-USD) was down roughly 9%, to trade at $33,080 ($23,381). It's "nudging towards half the record price reached in mid-April of above $63,000," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Ethereum (ETH-USD) — the world's second largest crypto by market cap — fell about 10% and was trading at $2,522. Meme-inspired dogecoin (DOGE-USD) plunged 11% to trade at $0.33 although its mainstream acceptance continues: fintech Revolut said its users can trade the joke token on its app.

Trump's comments weren't the only thing pulling down cryptos. Coindesk noted: "Bitcoin’s price has fallen to its lowest point in over a week as traders stare down prospects of shifting US monetary policy and continued tightening of regulation of cryptocurrencies in China."

Cryptocurrencies had a turbulent weekend following reports Chinese social media site Weibo suspended "key opinion leaders" (KOL), reigniting fears of further crack down in the country.

Further action from the country is expected which would link crypto more directly with criminal law, the Guardian reported, citing analysts and a financial regulator.

Bitcoin's price plunged on Tuesday morning. Chart: Yahoo Finance UK
Bitcoin's price plunged on Tuesday morning. Chart: Yahoo Finance UK

Bitcoin is flagging "despite the fact that El Salvador has become the world’s first country where bitcoin has officially received the reputation of a legal tender," said Naeem Aslam, chief market analyst at Ava Trade.

"Bitcoin price is falling out of love once again and it seems like that bulls are losing more grounds," he said, adding that "traders need to keep their eyes on the 30 minute time frame... because on this time frame, we are likely to see the bullish signs emerging first".

He also said that "the relative strength index is way oversold and this means that the bitcoin price is likely to see some bounce back in its price very soon."

Streeter said that "although it’s clear that cryptocurrencies in some form will find a place at the table in the financial system, given the interest by large companies and governments, it’s very unclear which of the thousands of cryptocurrencies will retain their value in the future and what role they will play."

"Given speculating in crypto assets remains such a high-risk strategy, traders should only commit money they can afford to lose.’’

Watch: What are the risks of investing in cryptocurrency?