Bitcoin Slides 50% From Top, Recovers Slightly to Start the Week
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- Cryptocurrencies go through a decline of 50%, or more, as investors seek safety
- Monday looks set to bring green across the board as cryptos jump to kick off the week
The cryptocurrency market accelerated its downturn over the weekend as major coins went into a free fall. Bitcoin nosedived more than 18% on Sunday, bringing its total decline to 52% from its peak in mid-April. Dogecoin reached $0.28 and was down more than 60% from its all-time high in early May. Ether slid 27% yesterday, erasing more than 60% from its price since the historical record of $4,400 on May 12.
The total cryptocurrency market value dropped from a record of $2.5tn to $1.2tn, a decline of more than 50% in two weeks. The turbulent week extended the decline of cryptos through the weekend as market participants fended off the latest broadside against the emerging marketplace.
Announcements by Tesla, Elon Musk, UBS chief investment officer, Deutsche Bank, and, most of all, China, rattled the crypto market, prompting one of the biggest weekly sell-offs to date in crypto land. Before the latest swoon, bitcoin had been through several waves of selling where its market cap would see a depreciation of 50% in two weeks or less.
The onset of the current sell-off is largely attributed to Elon Musk’s tweets or the so-called Musk Effect. The billionaire entrepreneur has made a lot of crypto investors unhappy due to his outspoken Twitter posts. The Tesla chief executive sent bitcoin’s price on a roller-coaster this year. Since he added “#bitcoin” to his Twitter bio on Jan 20, which sent the coin 20% higher that day, he has been actively involved in the market.
Chinese Clampdown on Crypto
In February, he revealed Tesla bought $1.5bn worth of Bitcoin, fueling a 16% jump in price on the day. Earlier this month, he made a surprising statement that Tesla will no longer accept Bitcoin as payment for its electric vehicles. The news arrived on May 12, the day when the crypto market reached a record valuation of $2.5tn.
Bitcoin’s punishing price decline accelerated last week when a slew of bad press sloshed around crypto circles. UBS chief investment officer Mark Haefele took a hard line on bitcoin, saying the cryptocurrency is a “speculative asset”. He added that due to high volatility, the digital assets could not be considered currencies and that the benefits of holding cryptos “are limited”.
Deutsche Bank joined with a report by analyst Marion Labouré who said: “the value of bitcoin is entirely based on wishful thinking.” The analyst added regulatory oversight is expected to impose harsh taxes over the crypto market as soon as early next year.
And most of all, China delivered the final blow on Friday when Chinese authorities announced they will clampdown on cryptocurrencies as part of a broader effort to secure fiscal monopoly and protect against financial risk. In a statement released Friday, Vice Premier Liu He said the government plans to “crack down on bitcoin mining and trading behavior”. The news knocked 12% off bitcoin’s value that day.
Nevertheless, Monday is flashing green across the crypto market as investors attempt to stage a comeback. Bitcoin today is up nearly 9%, trading around $36,000, while ether is higher by 10%, hovering right below $2,300. Dogecoin is gravitating toward $0.32, up about 5% on Monday.
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