Last year in April, the crypto market held plenty of promise. Bitcoin soared to all new heights, boasting a $69 044 worth. This was just over double the value of its $30,000 worth in January 2021. Then, as if wanting to remind investors of cryptocurrency’s speculative nature, Bitcoin crashed.
So, what happened then? What’s happened since? And where does the token sit now? We’ll tell you below.
The Reasoning Behind The Bitcoin Crash
There are a few reasons why the token suddenly lost all of its 2021 earnings which can be good to have in mind for 2022. The major players on this one include China, Elon Musk, and trader sentiment.
China Tightens Crypto Regulations
In May 2021, cryptocurrency saw major crackdowns in China. The Chinese government effectively banned all financial institutions from supporting bitcoin or other digit assets. The new regulations banned processing transactions, letting customers have bitcoin in their accounts, and converting bitcoin into any other currency.
Considering China’s history with bitcoin, the May regulations actions weren’t entirely shocking. Since 2013, China made moves against Bitcoin, when third-party payment platforms had to stop using this digital asset. In 2017, government authorities halted toke sales and promised to continue tightening restrictions in 2019.
Typically, China’s cryptocurrency regulations soften over time, but this no longer seems the case. Following the latest laws, there have been mass arrests related to crypto and radio silence from around half the world’s bitcoin miners (all based in China).
The ban contributed to the descent from the record $65K high and helped prevent another immediate spike.
Elon Musk May Have Influenced The Spike And Crash
So, what does Elon Musk have to do with the price change? Didn’t he contribute to the increased value? Good questions — we’ll break it down for you.
It’s true; Musk possibly influenced both the rise and fall of the token. In February, Musk announced that Tesla, his electric car company, invested $1.5 billion in Bitcoin. Just a month later, Tesla started accepting bitcoin as a form of payment for their electric cars. Both actions sent investors into a frenzy, and the value began its radical rise.
Shortly after these announcements, Musk and Tesla reversed course. Around the same time as China’s May ban, Tesla said it would no longer accept bitcoin as a form of payment. Musk cited the reason as crypto mining’s potential environmental harm. Critics have speculated the initial support behind bitcoin as a publicity stunt for Tesla, which Musk has previously come under fire for.
Regardless of the reasoning, the company’s change-of-plans immediately resulted in bitcoin falling under $50,000, setting the stage for the huge crash.
The Trader Panic
Although the bitcoin crash was hard and fast, it wasn’t too surprising to leading financial experts. When it comes to cryptocurrency, volatility is in its nature. All traders contribute to the rise and fall of the supposed value. Though trading and investments are often cited as a space where you need to “leave your feelings behind,” that isn’t exactly the case.
When the outlook is promising (i.e., Musk, one of the richest men in the world, invests over a billion dollars into bitcoin; Tesla, a multi-billion dollar company, accepts bitcoin as a form of payment), people respond with an optimistic frenzy. So, naturally, this drives trade up, thus driving up the value.
But when prospects look more doom and gloom (i.e., China imposing strict bitcoin regulations; Tesla changing its stance on bitcoin), traders panic, sell and stop trading. Therefore, the price comes crashing down.
What Happens Now?
If you’re curious as to what’s happened since the bitcoin crash, keep reading. While we won’t offer financial advice, we’re happy to inform you of this digital asset’s present standing and what the data says about its future.
Looking At Today
In July 2021, the entire cryptocurrency market reached a low of $1.2 trillion. As of January 2022, things are looking slightly brighter comparing to this period.
At the time of writing, BTC is worth $43,820, about a 48% increase from the July low of $29,608.60. The latest established pricing has resulted in a new way of optimism regarding the token, with investors remarking on the coin’s ability to shrug off this last year’s negative press, and holding a higher, “new low”.
The crypto market as a whole now pushes for a $2 trillion value. So, how does this affect the future?
As we’ve discussed, crypto is highly volatile. Trading in this market is not a guaranteed get-rich-quick scheme. Bitcoin is speculative trading, meaning it possesses a substantial risk of losing value, but the expectations are significant gain. Speculative trade can leave data analysts divided on the future of the token.
A few weeks after the crash, the prediction for bitcoin’s value sat around $20 000. Experts did sing a different tune as we were closing in years end.
Mike McGlone of Bloomberg Intelligence said bitcoin could value at $100,000 by the end of 2021. Others have said the asset should see no issue returning to and exceeding the previous record high. These noteworthy predictions come despite (or perhaps because) the United States Senate passing new tax reporting requirements on crypto.
Spring of 2021 looked overwhelmingly promising for bitcoin, but early summer gave way to a plummeting value with the Bitcoin crash.
And this messy plummet involved multiple key players. China enforced strict regulations against cryptocurrency, which made the country’s large population of miners go dark and prohibited financial institutions from anything crypto-related. Elton Musk, via Tesla, went from investing $1.5 billion into bitcoin to banning his company from accepting it as a form of payment. And traders? They reacted to the rollercoaster of events, affecting the value in turn.
As of now, the leading token seems to be switching the narrative once again. The future seems promising, but we’ll have to wait and see where we will go from here.