THE CRYPTO MARKET CRASH
The sharp drop in bitcoin and other cryptocurrencies comes as a swarm of unfavorable news and catalysts, ranging from Tesla CEO Elon Musk to a new round of Chinese government regulations, which have impacted an asset class that has been marked by extraordinary volatility since its inception.
On Wednesday, 19th May 2021, on the cryptocurrency market, the prices of the major currencies, including Bitcoin, Ethereum, BNB, and others, collapsed by up to 30% in 24 hours. The situation happened in context with the announcement on cryptocurrencies on Tuesday by Chinese regulators. China prohibited the provision of crypto-currency transaction services by banking institutions and payment providers. This means that banks and payment channels online must not offer any service including registration, trade, clearing, and settlement to clients concerning cryptocurrencies. In 2017 too, China had enacted such a restriction, but the new guidelines enlarged the area of forbidden services as compared with the prior prohibition and assumed that “virtual currency does not have a true value.”
Whereas the Chinese announcement was the straw breaking the camel’s back, Bitcoin and Ethereum were down since CEO Elon Musk announced the last week that Bitcoin will not be accepted as a payment by the electric carmaker, a reversal of a previous decision. One of the major causes of the crypto crash was China’s exclusion of financial and payment institutions from providing crypto services.
A day before the market routine, Vitalik Buterin, 27-year-old crypto billionaire and co-founder of Ethereum, discussed a possible cryptocurrency crash. On 18 May, Buterin interviewed CNN business to say that, though it was “notoriously difficult to predict” when this bubble could break, he believed that cryptocurrencies were a bubble.
The next day, several cryptocurrencies took place on the crypto market. The Buterin currency ether also declined by 40%, according to the Coindesk data, to about $1,900, lower than ever since early April.
Ether had declined sharply from the previous $4,400 height in early May, wiping away a huge part of the wealth of Buterin as well. Buterin, speaking about the ongoing love affair of Tesla and SpaceX chief with crypto that often triggers fluctuations in the price, said that “the crypto spaces have only been literally introduced for the first time last year and this year,” Musk tweeted over cryptography.
“I believe a little craziness is reasonable to expect. But I believe the markets are going to learn. Elon will not always have this influence, “
On March 24, TESLA Chief tweeted that you could buy a Tesla with Bitcoin. This cheered the crypto market and made sure that the game was endorsed by an institutional giant like Tesla.
On 13 May, Musk reversed Tesla’s decision to sell Bitcoin cars, which caused tremors to the crypto world leading to a decrease in prices for digital currencies.
“To do anything like this seems to be far more difficult and much less realistic,” said Buterin. “At the same time governments have the power, and it is important to listen to regulators and try to do the best possible to deal with issues, to make it more painful to take part in the crypto industry.”
When you get involved in the crypto realm, you should expect some wild, nail-biting moments. A number of factors this week added fuel to an already nervous market, including government warnings about more regulation and remarks from influential market mover Elon Musk.
A bright future awaits……
“These big crypto bubbles, we’ve got at least three so far,” Buterin said to the publication. “Why, often, the reason the bubbles stop is that some events just show that the technology is not yet there.”
The week’s violent swings put cryptocurrency enthusiasts to the test. True believers prefer to look at the big picture, i.e., bitcoin was trading over $7,000 a coin at the start of 2020, meaning it’s still grown more than 400% since then, despite its recent drop.
