The bitcoin sector has a lot of potential in April of 2017. Bitcoin's price has reached all-time highs, currently standing at $69 044 USD. This is more than twice as much as its value of $30,000 in January 2021. Bitcoin's price suddenly fell, as if to emphasise to investors that the value of cryptocurrencies is very speculative.
So, what happened after that? What occurred after that? And where is the token at the moment? The solution is provided below.
The Real Reason for Bitcoin's Crash
There are numerous possible causes for why the token abruptly lost all of its earnings in 2021, and each of these arguments could be considered in 2022. The three most significant characters in this one are China, Elon Musk, and trader sentiment.
China is tightening up on cryptocurrency regulations.
In May 2021, China launched a major crackdown on cryptocurrency markets. The Chinese government has effectively made it unlawful for any financial institution to support bitcoin or any other digital currency. Customers can keep bitcoins in their accounts and exchange them for other currencies despite the new restrictions, which prohibit transaction completion.
Given China's history with bitcoin, the regulatory move taken in May isn't all that shocking. Since 2013, China has taken action against bitcoin by restricting third-party payment systems to refrain from using it as a form of settlement. The government banned the sale of tokens in 2017 and pledged to tighten regulations even more in 2019.
It is common for China's cryptocurrency prohibitions to relax over time, but this does not appear to be the case at the moment. As a result of the most recent piece of legislation, there have been numerous arrests involving cryptocurrencies, and roughly half of the world's bitcoin miners have gone radio silent (all based in China).
The ban contributed to the price dropping from its all-time high of $65,000 and helped to prevent another fast surge.
Elon Musk's Potential Role in the Spike and Crash
As a result, what impact does Elon Musk's involvement in the pricing change have? Isn't it obvious that he had anything to do with the increase in value? You've asked an excellent question; please allow us to elaborate.
That's correct; Musk could have an impact on the token's growth or decrease. Musk stated in February that his electric car firm, Tesla, will spend $1.5 billion in Bitcoin. Musk is the sole owner of Tesla. Tesla began accepting bitcoin payments for the purchase of their electric vehicles exactly one month after that announcement. Both of these behaviours drove investors insane, leading to a large increase in their worth.
Not shortly after this declaration, Musk and Tesla abruptly revised their strategy. Tesla said in May that it will no longer accept bitcoin as payment, just as China outlawed the cryptocurrency. Musk justifies his decision by citing the inherent dangers of working in the cryptocurrency mining industry. Some speculated that Musk's first support for bitcoin was a PR trick for Tesla, despite Musk's earlier criticism of the company.
Whatever the motive for the company's action, the result was a rapid decrease in the price of bitcoin below $50,000, paving the way for a severe market correction.
Retailers' Frenzies
Leading financial professionals were unsurprised by the speed and severity with which bitcoin's price fell. By definition, the nature of cryptocurrencies makes them extremely volatile. Every investor has a say in whether the asset's purported worth rises or falls. Trading and investing are commonly regarded as pursuits in which one must “leave their feelings at the door,” but this is not the case in any of these activities.
When the prospects were favourable, people responded with optimism (such as when Musk, one of the richest people in the world, invested more than a billion dollars in bitcoin or when Tesla, a multi-billion dollar firm, embraced bitcoin as a form of payment). There is a lot going on. Naturally, this will boost business activity, resulting in an increase in its value.
However, as the outlook became more dire, traders panicked, sold out, and halted trading. This was owing to China implementing strict limitations on bitcoin, as well as Tesla shifting its stance on bitcoin. As a result, the price dropped.
What precisely is going on right now?
Continue reading if you want to learn more about what has happened since the price of bitcoin dropped. While we will not be providing financial advice, we are happy to inform you on the current state of this digital asset and what the data indicates about its future.
Today's Date
In July 2021, the entire value of the cryptocurrency market fell to an all-time low of $1.2 trillion. In comparison to the current situation, the picture for January 2022 is much brighter.
At the time of writing, one bitcoin is worth $38,520, representing a 30 percent growth from its low point in July, which was $29,608.60. Recent price has produced a new type of confidence surrounding the token, with investors noting on the coin's ability to ignore the previous year's negative pressure and maintain a “new low” higher. As a result, the token's value has risen.
At this point, the overall value of the cryptocurrency industry is rapidly approaching $2 trillion. What are the long-term implications of this?
The Future of Bitcoin
The bitcoin market, as previously stated, is quite volatile. Trading in this market is not a sure strategy to make a lot of money in a short amount of time. Trading in Bitcoin is considered speculative because there is a high probability that its value may fall, despite the fact that significant financial rewards are expected. Trading on speculation can supply data analysts with contradicting perspectives about the coin's future.
Estimates peg bitcoin's value between $20,000 and $20,000 a few weeks following the crash. As the end of the year approaches, many experts are singing a different tune.
According to Bloomberg Intelligence analyst Mike McGlone, the value of bitcoin might hit $100,000 by the end of 2021. Some predict that the asset should have minimal difficulty recovering to, if not exceeding, its previous record highs. This major projection comes despite (or potentially as a result of) the United States Senate enacting new bitcoin tax reporting regulations.
Summary
In the spring of 2021, Bitcoin's future appeared bright, but by early summer, its value had already began to fall, and the cryptocurrency experienced a crash.
This catastrophic fall involved a vast number of prominent actors. Because of China's strict cryptocurrency limitations, the country's large mining population is kept hidden, and financial institutions are barred from engaging in any cryptocurrency-related activity. After investing $1.5 billion of Tesla's funds on bitcoin, Elton Musk decided to stop accepting it as a form of payment and finally banned it outright. What about businesspeople? They react to an unpredictability of events, which influences value.
Currently, the big token appears to be shifting the narrative once more. Although it appears that positive things are in our future, we will have to wait and see what happens next.
