Cryptocurrencies fought to find a foothold on Monday after cheerleading from Tesla boss Elon Musk at the weekend seemed unable to offset pressure from spooked investors amid a crackdown on the asset class in China.
Musk had lent a bid on Saturday by tweeting support for crypto in "the true battle" with fiat currencies.
But on Sunday, prices slumped as "miners" - those who mint crypto by verifying transactions - halted Chinese operations in the face of increasing scrutiny from authorities.
Bitcoin climbed as high as $35,970 (€29,459) from Sunday's trough at $31,107 (€25,473), but the growing sense of a shakeout flowing through the market left it struggling to make further gains.
It remains some 45 per cent below last month's record peak of $64.895 (€53,142).
The collapse leaves the world's biggest cryptocurrency back where it traded in February, before Tesla announced a $1.5 billion (€1.2 billion) investment in Bitcoin and made a since-reversed decision to accept it as payment for cars.
Rival cryptocurrency Ether hit an almost two-month low around $1,730 (€1,417) on Sunday and bounced as high as $2,101 (€1,720) on Monday before losing some steam. Dogecoin, launched as a parody before Musk's backing vaulted it up more than a hundredfold this year, last traded at $0.30 (€0.25).
"After a brief bounce off last week's multi-month lows, some of the paper-handed types have seemingly sold-out," said IG Markets' analyst Kyle Rodda, using the market term for short-term holders who sell at the first signs of trouble.
"Or (they) decided to pack it in and cut their losses as Bitcoin's momentum, and the speculative mania that drove it, almost entirely disappears," he said.
China begins its crackdown
The trigger for the initial crypto selloff appeared to come from a hardening stance from Chinese regulators last week, which stepped up further on Friday when a State Council committee in the country vowed to crack down on miners in particular.
Chinese miners currently account for some 70 per cent of the world's supply of Bitcoin.
"Many miners keep much of the bitcoin/ETH etc that they mine and don't hedge it all into fiat right away," said James Quinn, managing partner at Q9 Capital, a Hong Kong-based cryptocurrency private wealth manager.
"If they are pulling up stakes or shutting down, they may need to reduce their balance sheets in the short term".
Late on Sunday, Huobi Mall, part of cryptocurrency exchange Huobi, said on Monday it suspended crypto mining that services mainland Chinese clients. BTC.TOP, a crypto mining pool, has suspended its China business citing regulatory risks, while crypto miner HashCow said it would halt buying new Bitcoin "rigs".
Crypto miners use rigs - increasingly powerful, specially-designed computer equipment - to verify blockchain transactions in a process that produces newly-minted cryptocurrencies.
"Crypto mining consumes a lot of energy, which runs counter to China's carbon neutrality goals," said Chen Jiahe, chief investment officer of Beijing-based family office Novem Arcae Technologies.
The annual energy consumption of China's cryptocurrency miners is expected to peak in 2024 at about 297 terawatt-hours, greater than all the power consumption by Italy in 2016, according to a study recently published in the scientific journal Nature Communications.
Chinese President Xi Jinping has pledged carbon neutrality by 2060.
China has already lost its position as a global cryptocurrency trading centre after Beijing banned crypto exchanges in 2017.
"Eventually, China will lose crypto computing power to foreign markets as well," BTC.TOP founder Jiang wrote, predicting the rise of U.S. and European mining pools.
According to Chen, the crypto craze - if not curbed - could turn into froth similar to the Dutch tulipmania in the 17th century, which is often regarded as the first financial bubble in recorded history.
"The only difference is that after the tulip bubble burst, there were still some beautiful flowers left," said Chen.
"But when the virtual currency bubble bursts, what would be left are merely some computer codes".