TL;DR Breakdown
• Bitcoin has gone through highs and lows due to speculation this week.
• The crypto crash is due to measures imposed by China.
The cryptocurrency frenzy has reached its wildest. However, the instability of crypto this past week was enough to make investors doubt its effectiveness.
On Wednesday, a crypto crash wiped out more than $1 trillion in market value. The crash was worth $2.5 trillion in less than a week. Bitcoin, the cryptocurrency that dominates 40% of the market, dropped 30% on Wednesday and is now priced at $30,000.
On Friday, the cryptocurrency recovered its value to $37k after the speculation and regulations from China. But, Bitcoin remains distant from its all-time high of $64k it achieved a month ago.
Instability is severely felt in the crypto market, but the massive growth of these coins in recent years has brought in new investors. Many of these traders could wait to accrue their investments back and exit the game or lose their money from this crypto crash.
Why does the crypto crash happen?
Cryptocurrencies were unstable for a week because Musk speculated on SNL. On the 12th of May, Bitcoin lost 12% of its value after Elon Musk reneged on his decision to accept the cryptocurrency as payment. Weeks before, Tesla’s CEO had approved the payment of cars with Bitcoins.
Musk’s move against Bitcoin comes due to cryptocurrency mining affects the environment. Many investors were hesitant about Musk’s speculation, citing that it is only part of a strategy.
But on Wednesday, Bitcoin dropped again due to the measures taken by the Chinese government. The central bank prohibited companies and financial institutions from accepting cryptocurrencies as payments or providing services with them.
Fear of heavy regulation caused the market to crash, and Bitcoin plummeted before recovering from its latest crash. The crypto crash also affected Ethereum, which fell 40%, while Binance Coin and Dogecoin lost 30% of their value.
On Thursday, Bitcoin rallied and rose to $41 billion. But in an announcement on Friday, the Chinese government reaffirms its action against cryptocurrencies. This statement caused Bitcoin to trade below $37,000 on Friday afternoon.
Concern about Chinese regulations
China has long had restrictions against cryptocurrencies. The government declared in 2013 that Bitcoin was not a physical currency, which prohibited its use in banking and payment entities. Citizens in China can own and invest with cryptocurrencies, but the most significant exchanges have been closed.
This week’s announcements reaffirmed China’s relationship with cryptocurrencies. Beijing has no intention of expanding its trade in digital currencies, at least not shortly. The recent crypto crash put Chinese traders and other regions in doubt about the market’s credibility.
