For the first time since January, Bitcoin, the world’s most popular digital asset, dropped below $30,000, a key milestone that technical experts watch. It lost all of its gains in 2021, according to Investment Centre, a crypto market data site, before recovering to trade at $32,481.93.
Bitcoin dropped more than 10% to $29,154.73 at one point, losing more than half of its value from April’s record high. This comes after a strong showing in 2020, when the digital currency grew by more than 300 percent.
Other cryptos followed suit before recouping losses, with ethereum, the second-largest digital currency by market capitalization, falling more than 5%. Over the last 24 hours, it has risen 0.7 percent.
The selling spread to smaller coins like Dogecoin, a meme-inspired cryptocurrency that lost more than 25% of its value at one point, wiping out all of its gains since April. It has since reversed course and is now down 1% in the last day.
Why are cryptos losing value?
Following a number of events, bitcoin has failed to recapture its all-time highs since reaching $64,000 in April. In May, it came under fire after tech billionaire Elon Musk, who has created trading excitement by promoting cryptos on occasion, announced that Tesla will no longer accept Bitcoin as a means of payment due to concerns about the cryptocurrency’s influence on energy sources.
Since then, cryptos have gyrated, with coins like ethereum moving in synch with bitcoin.
Bitcoin dropped even further in early June, owing to fears that it was used in the Colonial Pipeline ransomware attack.
Bitcoin, for example, nearly reached $40,000 last week before falling on Monday as China’s central bank tightened its grip on cryptocurrencies. China’s central bank announced that some banks and payment companies, including China Construction Bank and Alipay, had been directed to tighten their attitude on cryptocurrency trading.
On Monday, Bitcoin fell more than 10%, its biggest one-day slump in almost a month.
What has happened to the value of Bitcoin, Ethereum, and Dogecoin?
With Tuesday’s losses, bitcoin has lost more than half of its value since reaching an all-time high of $64,000 in mid-April. To be sure, bitcoin has increased by more than 200 percent in the last year.
According to Investment Centre, Ethereum has lost about 57 percent since reaching an all-time high of $4,356.99 in May, while Dogecoin has lost more than 70 percent since hitting a high of roughly 73 cents last month.
Is there going to be more suffering?
According to technical analysts, cryptos could be headed for additional losses based on a frequently followed indicator.
Bitcoin produced a death cross over the weekend, a chart pattern that indicates the possibility of a severe sell-off. Bitcoin’s average price over the last 50 days has fallen below its 200-day moving average, indicating that the digital currency may be under more pressure.
In a recent report, Edward Moya, senior market analyst at foreign-exchange trading agency OANDA, stated, “Long-term bitcoin supporters are getting anxious as a break of $30,000 might see a great amount of momentum selling.” “Many traders have been waiting for another push down, which might lead to a collapse towards the $20,000-$25,000 range for crypto traders.”
Some analysts believe that the bitcoin sell-off in May undermined institutional demand, putting prices under pressure in the short term.
“There is no doubt that the recent boom and bust dynamics have slowed institutional adoption of crypto markets, particularly Bitcoin and Ethereum,” JPMorgan strategist Nikolaos Panigirtzoglou wrote in a paper earlier this week.
Even still, some people are taking advantage of bitcoin’s recent drop as a buying opportunity. MicroStrategy, an enterprise software company, announced on Monday that it has purchased another $489 million worth of bitcoin, increasing its total holdings to 105,085 bitcoins.
Do you think cryptos are a good fit for you?
Young people to the market should proceed with caution. Experts warn that investing all of your assets in something as volatile as cryptocurrency might jeopardise your retirement. Wealth managers and financial experts have long been wary of these hazardous transactions for inexperienced investors due to their large swings.
Bitcoin began trading about $13 in 2013 and soared to over $1,000 by December. The digital currency soared to nearly $20,000 in late 2017, only to fall to about $3,000 the following year. Then came a remarkable rise to above $64,000 in April 2021.
Dogecoin has experienced comparable ups and downs. In recent months, it has ridden a same Reddit-fueled wave as equities like GameStop and AMC, aided by a series of tweets by Musk, who was boosting the cryptocurrency.
Despite recent drops, the fast rise in the value of bitcoin early this year has some analysts worried about a potential cryptocurrency market bubble, with bitcoin’s worth more than doubling since the beginning of 2021 at one point.
According to an 81 percent of investment managers questioned by Bank of America in June, bitcoin is still a bubble. This is up from around 75% of managers in May who stated the same thing.
While there’s no assurance that Bitcoin will return this time, those who believe in its long-term potential may see this drop as an opportunity to invest more, according to Bankrate.com analyst James Royal.
Royal stated, “Cryptocurrency dealers, particularly individuals, must be mindful of the dangers associated with the assets they own.” “In some circumstances, the dangers might include losing their entire investments.”
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