The cryptocurrency market experienced one of its most brutal single-day selloffs in recent memory on February 5, 2018, as Bitcoin shed roughly 14% of its value and crashed below the $7,000 mark for the first time since November 2017. The flagship cryptocurrency tumbled to approximately $6,955, according to CoinMarketCap data, representing a staggering 38% decline over the previous seven days alone.
The carnage was not limited to Bitcoin. Ethereum, which had been the sole holdout among the top three cryptocurrencies to maintain year-to-date gains, also plunged into negative territory for 2018, dropping approximately 15% in a single day to trade near $698. Ripple (XRP) fared even worse, down 67% year-to-date at just $0.73. In total, Bitcoin investors watched approximately $67 billion in market value evaporate over the course of a single week.
TL;DR
- Bitcoin crashed below $7,000, reaching $6,955 — a 38% decline over seven days
- Ethereum lost 15% in 24 hours and turned negative for 2018
- Major U.S. and U.K. banks banned cryptocurrency purchases via credit cards
- China deployed its Great Firewall to block foreign crypto exchange websites
- Total Bitcoin market cap fell to approximately $117 billion
Banks Ban Crypto Credit Card Purchases
A significant catalyst behind the accelerated selloff was the coordinated move by major financial institutions to restrict cryptocurrency purchases using credit cards. Bank of America, J.P. Morgan, Citigroup, Capital One, and Discover all announced they had either implemented or were planning bans on customers using credit cards to buy cryptocurrencies like Bitcoin. The trend crossed the Atlantic on the same day, as the United Kingdom’s Lloyds Banking Group followed suit.
The banks cited concerns about speculative risk and the potential for customers to accumulate unmanageable debt amid extreme cryptocurrency volatility. For a market that had already been reeling from weeks of negative headlines, the loss of a major on-ramp for retail investors delivered a punishing psychological blow.
China Escalates Its Crypto Crackdown
Adding fuel to the fire, China announced it would block access to all domestic and foreign cryptocurrency exchange websites using its infamous Great Firewall. The People’s Bank of China, through its affiliated Financial News publication, stated that “overseas transactions and regulatory evasion have resumed” since the country’s initial ban on domestic exchanges in September 2017. The central bank warned that “risks are still there, fueled by illegal issuance, and even fraud and pyramid selling.”
The crackdown extended beyond exchange access. Cryptocurrency-related advertisements were scrubbed from China’s Baidu search engine and the Weibo social media platform, mirroring Facebook’s decision to ban crypto advertising just days earlier on January 30. The People’s Bank of China indicated it would “tighten regulations” on Chinese citizens participating in overseas cryptocurrency transactions and ICOs.
The Tether Cloud Lingers
Underlying the market panic were persistent concerns about Tether (USDT) and whether the stablecoin’s issuance was artificially inflating Bitcoin prices. Questions about whether each USDT token was truly backed by one U.S. dollar had been swirling for weeks, creating an additional layer of uncertainty for investors already grappling with regulatory headwinds and a rapidly deteriorating price chart.
A Brutal Correction From December Highs
For investors who had bought Bitcoin near its all-time high of approximately $19,500 in December 2017, the February 5 crash represented a painful 63% decline in portfolio value. Bitcoin was down 48% year-to-date, and the total value of Bitcoin in circulation had fallen to approximately $125.8 billion. The broader cryptocurrency market cap had contracted dramatically from its January peak.
Despite the widespread panic, some prominent figures in the cryptocurrency community remained defiant. Jameson Lopp, a well-known Bitcoin developer, publicly stated: “The more loudly folks proclaim that Bitcoin is dying, the more dollars I dump for BTC.” Similarly, the Bitcoin advocate known as Vortex argued that “this changes nothing” and pointed to the upcoming Bitcoin halving as a catalyst for future price appreciation.
Why This Matters
The February 5, 2018 crash was a watershed moment that exposed the fragility of cryptocurrency markets when faced with coordinated institutional resistance. The simultaneous credit card bans from the world’s largest banks and China’s escalation of its anti-crypto posture demonstrated how quickly regulatory action could choke off retail demand. However, the event also revealed the resilience of the Bitcoin community, as long-term holders and advocates continued accumulating during the panic. This crash would ultimately prove to be a painful but necessary reset that set the stage for the next market cycle.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk. Past performance is not indicative of future results. Always conduct your own research before making investment decisions.
Bank of America banning crypto on credit cards while their own settlement systems take 3 days to clear. the irony was lost on everyone at the time
the banks protecting customers from speculative risk while handing out subprime mortgages a decade earlier is wild
Lloyds following US banks on the same day was coordinated, not independent risk management. these banks talk to each other
38% in a week. $67B wiped. and somehow this wasnt even the bottom yet. march had more pain coming
XRP down 67% YTD at $0.73. people who bought the rippled narrative at $3 were absolutely destroyed
bought my first whole BTC during this crash at $7100. still holding. sometimes the panic is the opportunity