$64,846 is a value Bitcoin investors know all too well. The cryptocurrency reached this record high on April 14, 2021.
Unfortunately, investors didn’t have much time to celebrate. A significant Bitcoin price drop ensued, with the cryptocurrency briefly dipping below $30,000 in late June and July.
Many investors wonder why the lows of Bitcoin are so extreme. Some attribute the fluctuations to the intrinsically volatile nature of cryptocurrency. Others claim big players like Elon Musk, Tesla, and China are responsible.
Below, we examine a few of the most significant factors that lead to the Bitcoin price drop in 2021. Read on for valuable insights that can help you make more informed investments.
Natural Spiral From April Peak
Few people thought Bitcoin could ever reach as high as it did. Perhaps these speculations hold merit because once it hit its highest point in April, the cryptocurrency started to spiral.
Some say that the spiral was inevitable because this market is novel and unpredictable. However, we can point to a few events that may have contributed to the decline.
Elon Musk Distances Tesla and Himself From Bitcoin
The first dip below $30,000 in June was the result of many factors. For one, the public was starting to lose trust because of comments from Elon Musk.
In May, the CEO of Tesla said that his company couldn’t accept Bitcoin payments because of the environmental effects of mining. And in early June, he further distanced himself from the cryptocurrency via Twitter.
Perhaps one of the most significant factors in the June Bitcoin price drop was China’s crackdown. The government ordered miners to shut down their operations, with the Sichuan province taking a particularly big hit. The dissolution of these mining operations forced the market to take a $400 billion hit.
History Repeats Itself in July
Instead of continually tanking, Bitcoin made a slight recovery and was able to hover above $30,000 for the early part of July.
However, China’s persistent efforts proved to be too much for the cryptocurrency to handle. The country extended its crackdowns by forcing miners to completely shut down and banks to cease support of crypto transactions. Plus, Chinese financial institutions officially warned against the dangers of cryptocurrency as “speculative trading.” Once again, Bitcoin dropped below $30,000.
Bitcoin Price Drop — Inevitable?
One can say that a Bitcoin price drop is inevitable due to the market’s newness and responsiveness to world events. However, it’s worth noting that rises are just as likely. The cryptocurrency made an impressive recovery after the July price drop when Elon Musk went back on his May and June statements. He said that Tesla will “most likely” accept Bitcoin once it adopts more environmentally-friendly mining practices.
In short, investors should understand that volatility is the only certainty.