The Two Most Important Reasons For the Fall Of Cryptocurrency Prices

The showtime rule of writing about Bitcoin is: don’t write virtually Bitcoin.

The story of the world’s best known cryptocurrency is astonishingly fast-moving and its fans will shortly line up to tell you lot you’ve got it all wrong.

But write about information technology we must, considering the past 24 hours have been catastrophic for the grande dame of cryptocurrency – even past Bitcoin standards.

I’one thousand going to concentrate on Bitcoin hither – just if you’re a crypto follower, you’ll know the whole market is troubled, to put it mildly.

As I write this, Bitcoin is trading at $21, 974 (£18,000). It’s fallen 25% in the past five days alone, to its What’s happening to Bitcoin?lowest value in xviii months. Its peak of almost $70,000, in November, feels a lifetime ago.

The charts are all blood-red and they’re going in one direction – downwards.

Experts say this is because of the wider global climate. It’south non just in the crypto world things are not looking skillful.

Recession looms, inflation is soaring, interest rates are ascension and living costs are bitter. Stock markets are wobbling too, with the US S&P 500 now in a bear marketplace (down 20% from its recent loftier).

As a result, even the big investors are less free with their money. And many ordinary investors – not rich hedge-fund owners or corporations but people like you and me – have less to invest in anything, total stop.

For many, an investment in something as volatile and unpredictable as cryptocurrency feels like a risk too swell in these times.

It’s unregulated and unprotected by the fiscal authorities, and then if you lot’re using your savings to invest in information technology and it loses value, or you lose access to your crypto wallet, your money has gone.

Last month saw two much lower-profile but nonetheless significant coins collapse – and this knocked a lot of conviction in the market overall.

Every bit a result, people are increasingly deciding to sell up.

The more than people sell, the less Bitcoin is worth, because that’due south how information technology works – its value is pegged to its desirability. This has a knock-on result of more people selling because they can come across the value going downwards… and the cycle continues.

Unlike other more than traditional assets, Bitcoin has no intrinsic value to underpin it – in that location’south no bricks and mortar, acquirement stream or underlying business concern, FT markets editor Katie Martin says.

“The cost is only and purely whatever people are prepared to buy it from you for,” she tells me.

“That’southward when it gets scary for people because, if enough people head for the leave, at that place’s no floor. There’s nothing to stop information technology trading at $x,000 tomorrow, if enough people give upwards or are forced to sell.”

So that’due south the already difficult backdrop for Bitcoin – and then, the past 24 hours saw these developments:

1. Binance, the largest global crypto exchange (basically a platform for trading cryptocurrencies), paused all Bitcoin withdrawals for a few hours. It said this was due to a “stuck transaction” – although, non everybody believed it
2. The crypto lender Celsius did the same – but it cited “extreme market conditions” rather than technical difficulties. And now, the Coinbase substitution has just announced it is laying off 18% of its workforce, blaming, in role, the “crypto winter”
3. Spooked investors started selling off even more Bitcoin

The start ii caused panic. Imagine if you lot all of a sudden couldn’t withdraw cash from your bank, or you heard other people couldn’t. You’d be at the nearest cash machine, along with everybody else, in record time, and this in itself would create more upheaval and more panic.

In a nutshell – in social club to stabilise it, people who still accept Bitcoin would need to hold on to information technology and others would need to start buying it again. This has happened earlier.

Crypto fans will tell y’all at present is a great time to purchase, considering it’s cheap – and yous then have to sit down tight and lookout man information technology turn the corner. This is how it’southward always worked.

I of them tweeted me earlier: “The pump volition ever happen.”

The persuasive stories of those who accept “got rich quick”, and the loftier-profile celebrity endorsements, do attract new money.

Elon Musk has tweeted prolifically about his honey of crypto – and his electrical-machine company Tesla invested $1.5bn in Bitcoin last year.

Only investment advisers urge tremendous circumspection.

“Honestly, it’s somewhere merely the dauntless should enter,” State Street Advisors managing managing director Altaf Kassam told BBC Radio five Alive’southward Wake Up To Coin programme.

And speaking of dauntless, Hollywood A-lister Matt Damon fronted a crypto advertising with the slogan “Fortune favours the brave,” in October 2021. It played out at the Super Bowl and has been viewed 28 million times on Twitter and YouTube.

Even so the “brave” who bought Bitcoin when the advertising came out probably won’t now exist feeling they were done any “favours” – it was worth about three times as much and so equally it is today.