The story of the world’s best known cryptocurrency, bitcoin, is surprisingly fast and its fans will soon line up to tell you you got it all wrong. But we have to write about it, because the last 24 hours have been catastrophic for the cryptocurrency grand dame, even by Bitcoin standards. I will focus here on Bitcoin, but if you are a follower of cryptocurrenciesyou’ll know the whole market is upset and swooping, to put it mildly.
Bitcoin, what is really going on?
As of this writing, Bitcoin is trading at $ 21,974 (approximately € 20,900). It fell 25% in the past five days alone, to its lowest in 18 months. Its peak of nearly $ 70,000 in November feels like a lifetime ago. The rankings are all red and are going in one direction: down but why?
Experts say this is due to the wider global climate. It’s not just in the cryptocurrency world that things aren’t going well. Recession looms, inflation is skyrocketing, interest rates are rising, and the cost of living is stinging. Equity markets are also fluctuating, with the US S&P 500 now in a bear market (down 20% from its recent high).
As a result, even big investors are less free with their money. And many ordinary investors, not wealthy hedge fund owners or corporations, but people like you and me, have less to invest in anything, full stop. For many, an investment in something as volatile and unpredictable as cryptocurrency seems like too much of a risk these days.
It is unregulated and not protected by financial authorities, so if you are using your savings to invest in it and it loses value, or you lose access to your crypto wallet, your money is gone, FOREVER!
But why now? Last month saw two much lower profile but nonetheless significant coins plummet, and this one it greatly undermined confidence in the market in general. As a result, people increasingly decide to sell.
The more people sell, the less Bitcoin is worth, because that’s how it works: its value is anchored to its desirability. This has a ripple effect on more people selling because they can see the value go down… and the cycle continues.
Unlike other more traditional assets, Bitcoin has no intrinsic value to stand it on – there are no bricks and mortar, revenue streams or underlying assets, says Katie Martin, editor of FT Markets.
“The price is only and purely what people are willing to buy from you”
“That’s when it gets scary for people because if enough people make their way to the exit, there’s no room left. There is nothing to stop it from trading at $ 10,000 tomorrow if enough people give up or are forced to sell. “
So this is the already difficult scenario for Bitcoin and then, the last 24 hours have seen these developments:
- Binance, the largest global cryptocurrency exchange (basically a platform for trading cryptocurrencies), suspended all Bitcoin withdrawals for a few hours. She said it was due to one “Transaction blocked”, even if not everyone believed it.
- Cryptocurrency lender Celsius did the same, but sued “Extreme market conditions” rather than technical difficulties. And now, the Coinbase exchange has just announced that it is laying off 18% of its workforce, blaming, in part, the “Crypto winter”.
- Scared investors started selling even more Bitcoin
The first two caused panic. Imagine if you suddenly couldn’t withdraw cash from your bank or felt that other people can’t, you would be at the nearest ATM, along with everyone elsein record time, and that in itself would create more upheaval and more panic.
What can change things?
In a nutshell: to stabilize it, people who still have Bitcoin should keep it and others should start buying it again. This has already happened. Cryptocurrency fans will tell you that now is a great time to buy, because it’s cheap and so you have to sit still and watch it turn the corner. This is how it has always worked.
The compelling stories of those who are “Get rich quickly” and sponsorships of high-profile celebrities attract new money. Elon Musk prolifically tweeted about his love of cryptocurrencies and his electric car company Tesla invested $ 1.5 billion in Bitcoin last year.
But investment advisors call for great caution. “Honestly, it’s a place only the brave should enter”State Street Advisors chief executive Altaff Kassam told BBC Radio 5 Live’s Wake Up To Money program.
And speaking of bravery, in October 2021 Matt Damon unveiled a crypto advertisement with the slogan “Luck favors the brave”. She performed at the Super Bowl and was viewed 28 million times on Twitter and YouTube.
However, i “Brave” who bought Bitcoin when the announcement came out will probably not feel they have received any now “favor” it was worth about three times as much then as it is today.
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