The cryptocurrency market has been witnessing a severe correction over the past few days. Markets fell nearly 30% in the past week, and the Bitcoin market crash wiped out almost $1 Trillion from the cryptocurrency market in a few days. Fan-favourite Dogecoin, too, witnessed a plummet, losing nearly half its value to the crash.
While some believe the worst is behind them, many are worried that the hysteria is far from over. The Bitcoin cryptocurrency is still reeling as we speak, and with it, the whole market. But what changed in the past few days was that the bull run of the market did a 180° turn, and the days of the bear started. Why exactly did the Bitcoin market crash?
Reasons Why Bitcoin Prices Are Dropping
Much like any other financial asset, there comes a time when the market corrects itself after a serious bull run. Throughout late 2020 and 2021 till now, Most coins have clocked in serious returns, with Bitcoin reaching $64,000 a few weeks ago, while Ethereum breached the $4,000 mark only last week. But this week, the Bitcoin market crash has changed it all. There is no one reason why Bitcoin is dropping, but it may be a combination of many. Here are the probable reasons why Bitcoin is dropping like crazy, along with the whole market.
1. The Elon Musk-Bitcoin saga
Elon Musk, CEO of Tesla, has had a love-hate relationship with Bitcoin and cryptocurrency in general, which has been going on for years. While Elon was not in favor of cryptocurrency a while ago, this year changed that. Earlier this year, Tesla announced that it would start accepting Bitcoin as a payment method for its cars and purchased $1.5 billion in Bitcoin. The announcement sent the market toward the sky, augmenting the bull run even more. However, in early May, Elon and Tesla announced that they would stop accepting Bitcoin as a payment option, citing extensive mining and environmental concerns. Since then, Elon Musk has been highly critical of Bitcoin on Twitter, which may have been a significant reason why Bitcoin is going down.
2. China’s crackdown on crypto
On May 18, the People’s Bank of China’s banking and trade association announced a statement on cryptocurrency in the country. The announcement included severe restrictions that ban financial institutions and payment players from providing services related to cryptocurrencies. These services include but are not limited to account registration, trading, clearing, settlement, and insurance. This ban is a follow-up from the prohibition in 2017, which did not include these services. The ban has cast a shadow not only on crypto trading in the country but also on Bitcoin mining, which is a massive business in China.
3. Inflation in the United States
For the past few months, the financial market in the United States has been on a bull run. This includes stocks, bonds, funds, and cryptocurrency. For the past year, investors have been keen to buy into the market, which increased the prices. However, concerns about a looming rise in inflation and even a peak in economic growth have led to many investors pulling out of the market. Even the top-performing funds have started plummeting, along with other financial assets. Crypto, too, is bearing the brunt of the plummet, which is why Bitcoin is dropping severely.
4. New regulation on cryptocurrency in the United States
While there is no specific confirmation, US Federal Reserve chief Jerome Powell underlined cryptocurrency risks, a concern shared by many other top officials. This may be a signal as to regulations in the future, or even introducing a centralized digital currency, as is the case with many other countries.
What Buyers Think About Bitcoin Crashing
The Bitcoin market crash resulted in Bitcoin prices plummeting nearly 40% before witnessing a slight rise. At the time of writing, Bitcoin was being traded at almost $40,000 per coin, but it reached nearly $31,000 in a steep fall on May 19. The market is divided into two factions, one of which is in panic mode over the prices falling and is either trying to get their funds out to salvage whatever is left or hoping for a miraculous return. On the other hand, the other group is calm and believes that these corrections happen often. Considering the crypto market, which is typically highly volatile, these corrections often seem like a bloodbath. Moreover, the lower prices can be a good time to invest in Bitcoin and get additional profits when the market corrects again.
To help investors scared by the plunge, many experts share tips to help them make better investment decisions. Here are a few tips for you if you have invested in Bitcoin or other cryptocurrencies:
- Keep calm: It doesn’t matter what you do in the state of Bitcoin crashing like this, but whatever you choose to do, ensure that your emotions are not clouding your judgment. Crypto is a risky investment, and such dips and climbs will often happen in the future as well. So, before you rush in and out of the market in a complete state of panic, ensure you have thought well about your trading strategy.
- First, assess what is happening: In this turmoil, did you stop and think about why Bitcoin is dropping like crazy? Is it the news, is it Elon Musk, is it China, or is it just investor panic? There are many factors as to why the current price drop is happening, but it is essential to assess if these will have long-term implications or just short-term corrections.
- The market will always be volatile: The crypto market has always been volatile, as it has no cash flow but only investor sentiment to rely on. We witnessed a crash in 2017, but since then, the market has only grown. It has seen its fair share of volatility along the way, and it is sure to carry on forever. Therefore, always anticipate volatility, no matter which coin you invest in.
Bitcoin Price Comparison
Ever since its inception, Bitcoin investors have had a pretty roller coaster ride, at least for the most part. Even though the market is volatile every day for all coins, Bitcoin has seen way more than that. It has overcome an ecosystem that was plagued with scams, hacks, and pretty low penetration. Bitcoin’s price reached $1 for the first time in April 2011, and now ten years later, it is being traded at nearly $40,000, having breached $64,000 a few months ago. So, what has the journey been like?
While for the initial years, Bitcoin was just a gimmick to many, and not many people saw it as a potential financial investment. In 2017, however, the coin that was being traded at nearly $1,000 at the start of the year saw a monumental rise by reaching $20,000 in December. The streak put Bitcoin in the limelight, and digital currencies were up on the global stage.
But that was it for the bull run, as for the next two years, Bitcoin plummeted, reached nearly $3,000 in 2018, and was being traded at almost $7,500 at the end of 2019. Experts made predictions, and everyone thought everything would remain the same for 2020-2021 as well.
This is when the pandemic hit. The economy shut down, the offices were closed, and people were stuck at home. To find a way to earn some passive income, many new investors tried their hand at cryptocurrency. This once again sent Bitcoin into the sky, and the prices rose like anything. With $7,200 in January, Bitcoin ended 2020 with an all-time high of $29,000. But that was not the end of the Bitcoin story. Institutional investors and businessmen, too, flocked to get their hands on Bitcoin and other coins, making 2021 even bigger for the market. Right now, the market is crashing, but 2021 has seen all-time highs of almost all coins, and they are expected to grow even more once the market recovers.
Bitcoin Price Prediction
As we are witnessing right now, all Bitcoin predictions have failed, as the experts believed that the market would continue its bull run for the year. However, the trajectory soon came down, and we are witnessing a massive bearish trend in the market. But what are the experts saying now? Let us take a look at the Bitcoin price predictions for the near future.
Bitcoin price prediction 2021
While the cryptocurrency touched its all-time high of nearly $64,000 early this year, the recent crash has once again brought down the price to $40,000 levels. Experts believe that if the market corrects itself soon, we might witness Bitcoin trading at nearly $57,000 at the year-end. If not, then Bitcoin might fall more and reach almost $30,000 by the end of 2021.
Bitcoin price prediction 2022
According to financial experts, provided the market corrects itself in the remainder of 2021, and there are not many significant regulations on Bitcoin from various countries, we might see Bitcoin trading around $75,000-$80,000 in 2022.
Bitcoin price prediction 2025
The Bitcoin price prediction for 2025 embarks the traders on a journey with the bull and predicts that the cryptocurrency will reach an all-time high of $100,000, to as much as $4,00,000. Many experts believe that 2025 might be the year of Bitcoin, and we might witness heavy price lunges.
While these predictions might look good, it may be possible that they entirely fail. Since Bitcoin is not centralized and under any regulatory body, regulations by different countries might change the crypto landscape altogether in the coming years. Therefore, all predictions should be taken with caution, and one must not invest a lot based on them.
Is it the Right Time to Invest in Bitcoin?
Much like any other financial asset, it is impossible to predict the right time to invest. In the crypto market, we are witnessing a Bitcoin crash, along with all other major cryptocurrencies. So the question arises, is it the right time to invest in Bitcoin?
If you are thinking about how to invest in Bitcoin right now, a large section of investors will be pleased with your decision. The market is down, and some of the cryptos are trading at low prices. Moreover, the liquidity is high, which means that while the prices are low, the trades are still happening, and traders are present in the market. Furthermore, cryptocurrency penetration is increasing, more so recently, with the Dogecoin mania and the Shiba Inu coin frenzy. So, the interest is not going away soon.
Therefore, it is the right time to invest in Bitcoin. However, it is essential to note the risks before investing your money. Much like all other financial risks, invest in crypto with the money you are okay losing. It is imperative to make better financial decisions and not invest the money you depend on deeply. Crypto is a risky market and not a get-rich-quick scheme. You might have heard of 5 traders who made millions from Dogecoin, but you wouldn’t have heard of 100s who lost millions in Bitcoin.
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