Tesla, Coinbase lead drop in crypto-related stocks as bitcoin plunges

Cryptocurrency related stocks led by Tesla and Coinbase dropped on Wednesday as bitcoin plunged the equivalent of a bear market in just a single day.

Bitcoin, the world’s largest digital token, was down 20% in 24 hours at one point early Wednesday, according to Coinbase. It’s down more than 30% in a week. (Any drop greater than 20% in an asset or security is considered a bear market.)

The price fell below $40,000 for the first time in 14 weeks and dropped below $37,000 at one point early Wednesday.

The move comes after China on Tuesday barred financial institutions from conducting crypto-related transactions. Separately, a JPMorgan report showed large institutional investors were dumping bitcoin in favor of gold.

The pullback this month in bitcoin intensified a week ago after Tesla CEO Elon Musk appeared to change his tune a bit on crypto by saying the company would stop accepting bitcoin for payment because of environmental concerns surrounding crypto-mining.

“You had a confluence of events…where you started breaking down the positivity in the price action, and now we’ve got a liquidation event,” Galaxy Digital CEO and Chairman Mike Novogratz told CNBC’s “Squawk Box.” “It’s not going to bounce right back. It’ll consolidate for a while.”

Tesla, still a large holder of bitcoin, fell roughly 5% in premarket trading Wednesday. Microstrategy, which made headlines by buying a significant amount of bitcoin for its corporate treasury, tanked by 15%.

Coinbase, the newly public crypto exchange, dropped more than 10%. Bitcoin’s price approached $65,000 five weeks ago before peaking, around the time of Coinbase’s public debut.

Square and PayPal — which facilitate transactions in cryptocurrencies and have been big buyers — were also lower 6% and 4%, respectively, in premarket trading.

Nvidia ticked down 4% before the bell. The company manufactures chips used in crypto-mining, but reportedly trying to curb their use for that purpose.

— CNBC’s Michael Bloom contributed reporting.