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

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Key Points
  • Cryptocurrency related stocks led by Tesla and Coinbase fell Wednesday as bitcoin dropped to new session lows.
  • Bitcoin at its low point of the day was down more than 30% on the session to $30,001.51, its lowest since late January, before recovering some losses later Wednesday.
  • Tesla, a large holder of bitcoin, fell roughly 2.5% Wednesday.
  • Coinbase, the newly public crypto exchange, dropped about 6%.
SpaceX founder and Tesla CEO Elon Musk looks on as he visits the construction site of Tesla's gigafactory in Gruenheide, near Berlin, Germany, May 17, 2021.
Michele Tantussi | Reuters

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 at its low point of the day was down more than 30% on the session to $30,001.51, its lowest since late January, according to Coin Metrics. The cryptocurrency, and the related stocks, recovered some losses later Wednesday, with bitcoin climbing back to $39,774 at 4:01 p.m. ET.

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"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, longtime bitcoin bull, told CNBC's "Squawk Box." "The market will consolidate. It will find a bottom somewhere. I'm hoping its close to here."

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.

Tesla fell roughly 2.5% Wednesday. Musk late Wednesday morning indicated Tesla is not selling its large amount of bitcoin amid the cryptocurrency's drop.

Crypto-related stocks drop amid bitcoin's slide

Microstrategy, which made headlines by buying a significant amount of bitcoin for its corporate treasury, sunk 6.6%.

Coinbase, the newly public crypto exchange, dropped roughly 6% Wednesday afternoon. The website appeared to be down for some users Wednesday morning, but the company said it resumed service a few hours later.

Bitcoin's price approached $65,000 five weeks ago before peaking, around the time of Coinbase's public debut.

"Coinbase's trading debut coincides with the top for Bitcoin and many traders can't make a convincing argument that it will be able to recover all those losses since then," said Edward Moya, senior market analyst at OANDA.

Square and PayPal — which facilitate transactions in cryptocurrencies and have been big buyers — fell Wednesday morning before rallying back through the day. Square fell ticked down 1.5% and PayPal made up losses to close 0.6% higher.

Nvidia also dropped, then recovered later Wednesday with shares up 0.4%. The company manufactures chips used in crypto-mining, but reportedly trying to curb their use for that purpose.

Grayscale Bitcoin Trust, the popular trust holding a large amount of bitcoin, fell about 5% Wednesday.

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— CNBC's Michael Bloom contributed reporting.