Bitcoin: Elon, China and the 50% Wipeout of 2021

On the evening of Wednesday 12 May 2021, Elon Musk posted a statement on Twitter. Tesla, the electric car company he runs, had "suspended vehicle purchases using Bitcoin", he wrote, because of the "rapidly increasing use of fossil fuels for Bitcoin mining". Seven weeks earlier Tesla had started accepting Bitcoin for its cars. Three months earlier it had disclosed that it had bought $1.5 billion of it. Bitcoin fell about 5% within the hour, and that turned out to be the gentle part.

By the end of June Bitcoin had lost more than half its value. It peaked at about $64,800 on 14 April and was trading below $30,000 on 22 June. Two forces did most of the work: a celebrity changing his mind, and the Chinese state deciding that the industry which had made China the centre of Bitcoin would no longer be allowed to exist there.

The top: a stock market listing and a car company

Early 2021 was the peak of the pandemic money boom. Interest rates were at zero and cheap money was looking for a home. Tesla's purchase, disclosed in a filing on 8 February, made Bitcoin look like something a serious company could keep on its balance sheet. On 14 April Coinbase, the largest US crypto exchange, listed its shares on Nasdaq at a valuation that briefly passed $100 billion. That same day Bitcoin set its record.

It was also a market running on borrowed money. Traders on exchanges such as Binance and Bybit could bet with ten or a hundred times their deposit. When prices move the wrong way, those bets are closed automatically, a margin call with no phone call, and each forced sale pushes prices further. On 18 April a sudden drop wiped out $9.2 billion of borrowed bets on rising prices in 24 hours, according to data from the firm Bybt, now called CoinGlass. It was a warning nobody heeded.

May: the tweet and the State Council

Musk's U-turn mattered because he had spent months promoting crypto. He had added "#bitcoin" to his Twitter profile in January and talked up Dogecoin, a joke coin, on television. Tesla's reversal handed every critic of Bitcoin's energy use the most famous possible endorsement.

China delivered the second blow. On 21 May the Financial Stability and Development Committee of China's State Council, the cabinet, chaired by Vice Premier Liu He, said it would "crack down on Bitcoin mining and trading behaviour". It was the first time mining had been named at that level. Bitcoin fell as much as 10% that evening.

By then the damage was already large. On 19 May, a week after the tweet, Bitcoin had fallen briefly to around $30,000 on some exchanges as billions of dollars of leveraged bets were closed by force. May 2021 was Bitcoin's worst month since November 2018, down more than a third.

June: the miners are switched off

Bitcoin mining is the work of checking and recording transactions. Specialised computers compete to do it and the winner of each round is paid in new Bitcoin. It runs on electricity, and China had the cheapest: hydropower in Sichuan and Yunnan in the rainy season, coal in Xinjiang and Inner Mongolia. The Cambridge Centre for Alternative Finance estimated that China ran about 75% of the world's mining power in late 2019 and still about 46% in April 2021.

After the May statement the provinces moved one by one. On 18 June Sichuan's energy regulator ordered power companies to cut off mining sites by 20 June. Within weeks the computing power securing the network had fallen by more than half, according to Cambridge's estimates, and China's share fell to effectively zero in July and August. Miners shipped their machines to Texas, Kazakhstan and Russia. On 22 June Bitcoin dipped below $30,000, and it touched that level again on 20 July.

Then on 24 September the People's Bank of China, the central bank, declared all crypto trading and related services illegal in mainland China.

The rebound, and what it left behind

The market had already turned. In July and August buyers returned. On 7 September El Salvador made Bitcoin legal tender, the first country to do so. On 19 October the first US Bitcoin futures fund, ProShares' BITO, began trading on the NYSE Arca exchange in New York. On 10 November Bitcoin set a new record of about $69,000, five months after its June low.

That high did not last either. Bitcoin ended 2021 near $46,000 and fell much further in 2022, when the collapses of Terra and FTX took it below $16,000.

The China story did not end cleanly. Cambridge researchers found that China's share of mining rebounded to an average of about 21% between September 2021 and January 2022, which they attributed to hidden, off-grid operations. By October 2025 China was back in third place with about 14% of global mining, according to the data provider Hashrate Index as reported by Reuters, even though the ban was never lifted. The United States became the biggest mining country, with about 38% of the network in Cambridge's early 2022 estimate.

Tesla never restarted Bitcoin payments for cars. It sold about three quarters of its Bitcoin in mid-2022, near the bottom of the next crash, and still reported holding 11,509 coins in 2026. Musk, who moved markets with one post in 2021, went on to buy Twitter itself the following year.