Bitcoin records the biggest decline in its history. What is the reason for it? What the future holds for BTC?
This year’s May was one of the worst periods for Bitcoin in history. The world-famous cryptocurrency has seen its biggest price drop since its inception. What caused such a big turnaround? Elon Musk has played a big role in this, as well as the Chinese government. Bitcoin is still down at the beginning of June. Is it a good opportunity to decide to put part of your savings in it? What does the future hold for BTC and when should we expect the bull market to return??
As recently as mid-April, one Bitcoin was worth over $60,000. Now the price of the most famous cryptocurrency has fallen below the level of 35 thousand. There has never been such a big drop in the history of BTC. Reduction of 38 percent. On a monthly basis, it even overshadowed the market crisis of December 2013, when Bitcoin plunged 35 percent. Some investors are wringing their hands, because their investments turned out to be a failure. There is no shortage of traders who have lost huge amounts of money over the past month. On the other hand, those who have been waiting for price reductions now have room to grow. The current market situation should even be considered a bargain promotion. Many investors even think that right now it is worth investing in Bitcoin (e.g. On the other hand, the cryptocurrency has a lot of potential for price spikes (e.g. on Plus500). It is almost certain that BTC will rebound one day. The question is when that moment will come. Recent events may effectively slow down the rapid invasion of this asset.
Why the recent price drops?
Bitcoin’s black run began with Elon Musk stating that Tesla, the company headed by the billionaire, would not accept payments in cryptocurrencies, contrary to earlier announcements. This news literally shook the market and led to significant declines. The surprise for investors was huge, as Musk has long declared himself a supporter of cryptocurrencies. However, as he stated in a published tweet, Tesla has suspended purchases of vehicles with BTC for fear of the rapidly growing use of fossil fuels needed to produce more units of the world’s oldest cryptocurrency. It is no secret that the production of Bitcoin does not have much to do with ecology. In order to launch new tokens on the market huge amounts of energy are needed, and this in a way conflicts with Tesla’s policy.
Musk’s statements set off huge price drops in BTC. Tesla’s CEO still tried to salvage the situation, e.g. by publishing a tweet in which he stated that he had spoken with North American Bitcoin miners, and that they had committed to providing current and planned data on the use of renewable energy in the production of the cryptocurrency. That one social media post was enough to send the BTC exchange rate soaring by more than a dozen percent. However, this is not enough for the price of Satoshi Nakamoto’s creation to return to mid-April levels. Bitcoin’s unfavorable run was not interrupted by the Chinese government, which unexpectedly decided to curb the invasion of digital gold.
China declares war on bitcoin
What specifically is at stake? China has officially banned financial institutions and payment companies from providing cryptocurrency services. The People’s Bank of the Middle Kingdom has explicitly stated that cryptocurrencies are not real money and cannot be treated as such. This means that their use in China will be significantly restricted and will certainly affect the market, since it is in China where most new digital BTC coins are produced. The country wants to limit Bitcoin’s expansion for at least two reasons. First of all – they want to reduce the amount of energy needed to produce new tokens. Secondly – China is working very hard on releasing its own digital currency, which is supposed to be a real competition for BTC.
Bitcoin lost, and who gained?
Literally in the blink of an eye, Bitcoin has gone from being a safe haven during the crisis to an asset that has resulted in sizable losses for many investors. People have begun to look for other ways to protect their cash from inflation. This is where gold came to the rescue. Bullion has always been considered the safest investment asset in times of global turmoil. During the pandemic, the price of gold rose. The exception was this year’s March, when there was a rather large market collapse. However, recent events on the cryptocurrency market have reversed the unfavorable trend among raw materials, and today we have to pay over $1800 per ounce.
What fate awaits Bitcoin? Will its price rise? This seems inevitable, but it’s hard to say when BTC will start to gain. There is no denying that predictions about the bursting of the speculative bubble, which elevated the price of the oldest cryptocurrency for several months, have come true. The blow aimed at Bitcoin turned out to be very unexpected and painful. Most experts believe that digital currencies will grow in strength because the conditions are right for it. Rising inflation in many countries only makes cryptocurrencies stronger. However, it is impossible to predict the pace at which this development will now take place. Bitcoin has proven once again that it is an extremely volatile asset, susceptible to various external factors. In fact, any scenario can come true in its case. And yes – current prices of BTC encourage its purchase. You should be aware, however, that the next boom does not have to come very soon, and its size may turn out to be less spectacular as in the first half of this year.