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Bitcoin continues downward spiral after volatile week that crashed crypto market

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YICHANG, CHINA - MAY 19: Visual representations of digital cryptocurrencies Dogecoin, Ethereum coin and Bitcoin on May 19, 2021 in Yichang, Hubei Province of China. (Photo by Liu Junfeng/VCG via Getty Images)
YICHANG, CHINA - MAY 19: Visual representations of digital cryptocurrencies Dogecoin, Ethereum coin and Bitcoin on May 19, 2021 in Yichang, Hubei Province of China. (Photo by Liu Junfeng/VCG via Getty Images)

Crypto investors have been kept on their toes after China, Elon Musk and regulation fears sent a number of popular tokens deep into the red in recent days. 

The volatility shaved billions off the wider crypto world's value after deep correction hit the market. The global crypto market lost 9% in the last 24-hours alone, according to data provider CoinMarket

Bitcoin (BTC-USD), ethereum (ETH-USD) and dogecoin (DOGE-USD) have been struggling to return to the record highs recorded in April since the turmoil, with prices yo-yoing throughout the week. 

The price wash out continued on Sunday, with bitcoin dipping as much as 14.5% to $33,038 (£23,347) around 2:30PM in London, after brief gains on Saturday. 

Other currencies followed a similar trajectory, ethereum — the world's second largest crypto — crashed 23% to trade at $1,901, while dogecoin fell as much as 20% to $0.28 during the session.  

Chart: Yahoo Finance
Chart: Yahoo Finance

Blockchain-based technologies suffered two nosedives one on Wednesday and one on Friday, both in response to talk of a crackdown in China and Tesla (TSLA) boss Musk. 

On Friday, Chinese vice-premier Liu Hu said China would "severely crack down on illegal securities activities and severely punish illegal financial activities."

He promised a "crack down on bitcoin mining and trading" as part of China's plans to "prevent and control financial risks."

Lui's comments followed statements from three state-backed organisations, earlier this week, that warned digital currencies were not "real", should not be used for purchases, and could face regulatory changes from banks and other authorities.

The country's central bank issued a statement on its WeChat account reiterating that financial institutions should not accept or deal with cryptocurrencies.

"China’s ban on banks and payment firms from providing crypto transaction services is a major blow for bitcoin’s use case and that of its rivals," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Read more: Cryptocurrency carnage: Billions wiped off market as Musk says Tesla has 'diamond hands'

China's announcement followed a government report in Hong Kong released on Friday that said cryptocurrency exchanges will have to be licensed by its markets regulator.

Under the new rules, which were announced after months of discussions, only professional investors with a portfolio upwards of $1m will be able to use the platforms.

The city's Financial Services and the Treasury Bureau (FSTB) said on Friday that all virtual asset (VA) exchanges should be licensed if they wished to operate in Hong Kong.

Crypto exchanges in Hong Kong could previously "opt in" to be licensed by the Securities and Futures Commission.

Read more: Bitcoin and ethereum crash as China promises 'severe crackdown'

Musk has recently been in the spotlight for his role in crashing the crypto market after a U-turn on bitcoin, which he and Tesla have backed for years.

The billionaire, who is also the chief executive of space exploration firm SpaceX, sent bitcoin prices tumbling earlier this month after unexpectedly withdrawing Tesla's support for bitcoin payments.

He cited the environmental impact of bitcoin mining as the reason behind the unexpected U-turn.

On Saturday, he once again took to Twitter (TWTR), responding to people who blame him for the turbulence in the crypto market, saying the "true battle is between fiat & crypto." He added he "supports the latter" on balance.

The Tesla chief has also played a pivotal role in getting joke-crypto dogecoin to record highs, although he briefly crashed it after a Saturday Night Live (SNL) appearance.

Watch: Bitcoin falls again as China reiterates crackdown