Thursday, January 27, 2022

What Happened To The Crypto Market

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Where Is The Cryptocurrency Industry Headed In 2021

What Happened to the Crypto Markets? Why Bitcoin Tanked?

    Bitcoin, as of December 2020, has experienced a steady rise to reach new all-time highs, breaking through $20,000 per BTC, but it was not always so steady.

    To get a sense of just how troubling the market had been, just look to 2018: Heading into 2018, Bitcoin traded for close to $13,500 after reaching an all-time high of $19,783.06 in December of 2017. It subsequently dropped as low as $3,400, a loss of about three-quarters of its valueand other digital currencies weren’t faring much better at the time. Ethereum , for example, fell from an early-year high of $1,300 to just $91 by December 2018 before rallying back to over $450 by the end of 2020.

    Cryptocurrencies like Bitcoin and Ethereum have indeed proven resilient. Investor interest, both retail and institutional, in digital currencies has risen dramatically in recent months. Many early investors who were eager to make gains from the “cryptocurrency craze” have since moved on to other ventures, leaving a smaller group of stalwart HODL-ers behind. But there are still reasons to believe that the cryptocurrency industry has some fight in it left.

    Investors are again asking: how high digital coins could fly? And Bitcoin indeed has risen back to all-time highs as of December 2020, reaching over $23,625 and Ethereum to nearly $700. Now, looking into the end of 2020 into 2021, the better question might be how this space will adapt in order to survive.

    Crypto Traders Lost Over $1 Billion Worth Of Positions Yesterday

    Bitcoin and the crypto market didnt perform so well yesterday.

    For those who missed the memo, in the span of about two hours, the leading cryptocurrency tanked from $9,700 to a low of $8,100 a rapid drop of over 15%. As the drop came so fast, few were ready to handle the effects it would have on their portfolio.

    Immediately, as Bitcoin started to slide, leveraged traders began to register that their positions had been liquidated.

    According to data compiled by CryptoDiffer, the aggregate value of liquidations on May 10th was $1.22 billion 30% came from Huobi, 23% from BitMEX, OKEx, and Binance, and another small percentage from upstart platform FTX.

    As a note, just because $1.22 billion was liquidated doesnt mean that $1.22 billion was lost. Due to leverage, the actual value of coins that traders lost may be under $1 billion.

    What happened was due to the fact that investors expected more upside ahead of the halving, they were leveraged long. Thats to say, they borrowed money from exchanges betting that Bitcoin was going higher.

    But since prices dropped so quick, they were unable to maintain their positions due to a lack of margin, of cryptocurrency, in their accounts. This resulted in this mass liquidation event, the biggest since the March 12th Black Thursday crash.

    Crypto Market Hit With Yet Another Crash Heres What Happened

    The fearmongering continues to affect the fourth quarters crypto bull, this time around because of South Africas exclusive warning about a rapidly spreading new coronavirus. With the steep drop in global stock markets and the U.S. stock index futures, cryptocurrencies also bore the burn.

    According to CoinMarketCap, the OG crypto, Bitcoin fell over 4 percent, with a price of $54K, and a market cap of $1 trillion at the time of reporting. Following Bitcoins crash, Ethereum also dropped by 4.6 percent, with the price of $4k and a market cap of $485 billion at the time of writing. Traders are panic-struck, which is evident with the one-hour liquidation reaching 342.8 million US dollars, according to Coinglass data.

    Don’t Miss: What Is The Difference Between All The Cryptocurrencies

    What Is A Cryptocurrency And Why Use It

    Cryptocurrencies are digital assets that use cryptography, an encryption technique, for security. Cryptocurrencies are primarily used to buy and sell goods and services, though some newer cryptocurrencies also function to provide a set of rules or obligations for its holderssomething we will discuss later. They possess no intrinsic value in that they are not redeemable for another commodity, such as gold. Unlike traditional currency, they are not issued by a central authority and are not considered legal tender.

    At this point, use of cryptocurrencies is largely limited to early adopters. For scale, there are around 10 million Bitcoin holders worldwide, with around half holding Bitcoin purely for investment purposes. Objectively, cryptocurrencies are not necessary because government-backed currencies function adequately. For most adopters, the advantages of cryptocurrencies are theoretical. Therefore, mainstream adoption will only come when there is a significant tangible benefit of using a cryptocurrency. So what are the advantages to using them?

    Pseudonymity

    Peer-to-Peer Purchasing

    Programmable, Smart Capabilities

    Certain cryptocurrencies can confer other benefits to their holders, including limited ownership and voting rights. For example, a cryptocurrency-funded organization can include voting rights in the currencys software code. Cryptocurrencies could also include fractional ownership interests in physical assets such as art or real estate.

    Whats Behind The Latest Bitcoin Drop

    What Happened On The Crypto Market While Everyone Was ...

    Many investors see Bitcoins price swings as part of the game, but volatility is tough for individual investors to deal with, Noble says. Like Yang, he warns against selling too fast.

    While this recent drop is reminiscent of 2017s sell off, Bitcoins presence has grown a lot since then. New short-term investors who are selling their holdings in reaction to the drop may be influencing the continued dip in Bitcoins value, according to a recent report from Glassnode Insights, a blockchain analysis firm.

    While fluctuations are expected, Noble says this swing is a bit out of the ordinary. I thought the market was maturing and these things would be less frequent and severe. Boy was I wrong, he says.

    This particular drop was caused by a combination of factors that may have made this drop more severe, Noble theorizes, from excitement about low-quality coins, to negative remarks from Elon Musk, to Chinas latest crack down on crypto services. The accumulated response made this sell off all the more violent, says Noble.

    He likens the drop to the stock market crash of 1987, from which the markets took months to recover. But because crypto moves a lot faster today than equities did in the 1980s, Noble says we may see a quicker recovery.

    Dont panic and puke, Noble says. If you keep your positions small, you can try to tolerate the volatility.

    Also Check: What Are Cryptocurrencies And How Do They Work

    Bitcoin And Other Cryptos Have Slumped After Record Highs Is Market Manipulation The Reason Why

    Bitcoin and other cryptocurrencies have fallen sharply after seeing record-highs just last week.

    Bitcoins price plunged to $58,400 on Tuesday and hovered just under the $60,000 threshold on Wednesday as the crypto market is again becoming a sea of red.

    It marks a 12 per cent drop from the record high of $69,000 set on November 10.

    The second-largest crypto Ether meanwhile plunged more than 14 per cent since its record last week to reach $4,244 .

    The reasons why cryptos have been so volatile of late is unclear but there are a number of factors at play.

    The basic thing that happened was the Bitcoin price, we know it’s highly manipulated because this is an unregulated pool for sharks.

    One reason may be due to market manipulation, argues David Gerard, the author of the book Attack of the 50 Foot Blockchain. And it is all to do with Tether, a blockchain-based cryptocurrency whose tokens are backed by an equivalent amount of US dollars.

    Crypto Market Correction Vs The Dip

    A market dip is a very short-term slight decline in the market that is less severe than a correction, i.e., it results in a less than 10% decline and happens over one day or at most, a few days. However, continual small daily declines may result in a correction if, cumulatively, these declines result in over 10% depreciation of the market over the period.

    Read Also: How Much Should I Invest In Crypto

    How Are New Bitcoins Created

    The Bitcoin supply is limited by code in the Bitcoin blockchain. The rate of increase of the supply of Bitcoin decreases until Bitcoin reaches 21 million, expected to happen in 2140. As Bitcoin adoption increases, the slowing growth in the number of Bitcoins assures that the price of Bitcoin will continue to grow.

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    Crypto Market Correction Vs Reversal

    CRYPTO MARKET CRASH RECAP! What happened to VGX??!

    A reversal happens when the market changes the direction of its long-term trend. Unlike a correction, which is a temporary short-term decrease, a market reversal sets the new longer-term, typically multi-year, direction for the market.

    Since its beginnings in 2009, the cryptocurrency market has been growing strongly as measured by multi-year long-term trends, and a reversal has never happened in it.

    Also Check: How Do I Generate Bitcoins

    What Just Happened In The Crypto Market

    2 min read.Prasid Banerjee

    The cryptocurrency market suffered its worst crash in over a year last week, with leading currencies crashing as much as 30% in 24 hours after a bull run that began late last year took coins such as bitcoin and ethereum to all-time highs. What changed?

    The cryptocurrency market suffered its worst crash in over a year last week, with leading currencies crashing as much as 30% in 24 hours after a bull run that began late last year took coins such as bitcoin and ethereum to all-time highs. What changed?

    Why did the crypto market crash?

    The big sell-off began on 19 May after China barred financial institutions from dealing in cryptocurrencies. China had come up with such a ban in 2017 too, but the 2021 ruling has a wider scope. It bans institutions from accepting payments in crypto or using them for payment or settlements. It also prohibits anyone from providing exchange services that can be used to convert crypto to fiat currencies, including the Chinese yuan. Banks have also been directed to monitor money coming from crypto trading. This was a red flag for crypto traders, as China is one of the biggest markets in the world for crypto mining.

    How big is China in the crypto world?

    Security And Privacy Issues

    Computer hacking and theft continue to be impediments to widespread acceptance. These issues have continued to rise in tandem with the popularity of cryptocurrencies. In July 2017, one of the five largest Bitcoin and Ethereum exchanges was hacked, resulting in the theft of user information as well as hundreds of millions of Korean Won. The FTC also recorded an increase in identity fraud complaints of more than 100% between 2013 and 2016, and Coinbase, the largest US-based exchange, saw account hacking double between November and December 2016.

    The pseudonymous nature of blockchain and Bitcoin transactions also raises other concerns. In a typical centralized transaction, if the good or service is defective, the transaction can be cancelled and the funds returned to the buyer. However, in the cryptocurrency ecosystem, there isnt a central organization to facilitate recourse against the seller.

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    What Are The Prices Of Ethereum Shiba Inu And Cardano Today

    With cryptocurrencies often moving in tandem with Bitcoin, Ethereum, the cryptocurrency synonymous with the rising crypto trend of NFTs, was trading down by almost 9% on Friday after hitting a new record high of almost $5,000 in early November.

    Ethereums price was fluctuating at around $4,050.06 at 12.58pm on Friday down from $4,842.54 at 6am on 9 November.

    The hype surrounding popular memecoin Dogecoin had appeared to diminish in value recently as new alt and meme coins take centre stage.

    Shiba Inu coin is trading down by roughly 5% on the last 24 hours at approximately $0.000038 as of 1.05pm today after smashing through multiple record highs in late October.

    Dogecoin, meanwhile, was trading down by approximately 8.74% on the last 24 hours at $0.202421 on Friday afternoon.

    Meanwhile, Cardano prices are fluctuating around $1.54 in an almost 11% fall on the last 24 hours, XRP was down 9.86% at $0.946943 and Solana at $191.05 as of 1.02pm on Friday.

    Can I Predict An Upcoming Market Correction

    What happened on the crypto market while everyone was ...

    A simple answer to this question is a resounding NO. Market corrections are extremely hard to predict, nor are they worth losing your sleep over.

    Corrections cause only temporary and relatively minor declines in the market. They are followed by an upward trend in the charts and the market typically rebounds to the pre-correction levels within days, weeks, or at most a few months. If the rebound does not happen soon, as was the case in 2018, we are in for a longer-term market decline, not a correction.

    For a prudent investor with a long-term view of the market, corrections are best ignored. Nor should you change your investment strategy as a result of a correction or in anticipation of it.

    Recommended Reading: How To Avoid Paying Taxes On Crypto

    Chinas Latest Comments Led To A Market Dip

    The Chinese government has always attacked Bitcoin and other cryptocurrencies. The government has never made it a secret that they disliked cryptocurrencies and are determined to root it out in the country.

    The authorities came out again to speak out against cryptocurrency mining and blast Bitcoin. Chinas state planner, the National Development and Reform Commission , said during a press conference Tuesday that it will continue to clean up virtual currency mining in the country. The agencys spokesperson Meng Wei blasted Bitcoin mining, stating that it consumes a lot of energy and generates a lot of carbon emissions. As a result, the NDRC is set to launch a full-scale clampdown on crypto mining in China and intends to eliminate the activity entirely.

    Chinas latest comments on Bitcoin mining led to the broader crypto market embarking on a bearish run. Bitcoin lost more than 10% of its value earlier today and dropped below the $60k mark for the first time in weeks. The other leading altcoins, including Ether, Binance Coin, Cardano, Solana, Polkadot, XRP and Dogecoin, all lost more than 7% of their values. The total cryptocurrency market cap also dropped to $2.6 trillion after reaching the $3 trillion mark last week.

    What Is A Market Correction

    A market correction is a relatively short-term drop of between 10% and 20% from the most recent local peak in the markets performance. Market corrections are followed by an upward movement in the chart. Corrections can last a few days, weeks, or even months. Corrections are less severe market declines thancrashes. They also need to be distinguished from and .

    Read Also: How To Buy Crypto Ico

    Accounting Treatment Of Cryptocurrencies

    Under current accounting guidelines, cryptocurrencies are most likely not cash or cash equivalents since they lack the liquidity of cash and the stable value of cash equivalents. However, the accounting treatment of cryptocurrencies is still uncertain as there has not been official guidance on the issue from the International Finance Reporting Standards or The American Institute of CPAs .

    2014 Internal Revenue Service Ruling

    In the US, IRS Revenue Ruling 2014-21 stated that holders of cryptocurrencies should account for them as personal property, with gains or losses on purchases or sales. The value of cryptocurrency holdings on balance sheets would be at cost or fair market value at the time of receipt. Therefore, with the rapid increase in price, sales of cryptocurrencies lead to enormous gains at the time of sale: just consider the capital gains taxes on buying Bitcoin at $100 in 2013 and selling it for more than $4,000 in 2017!

    International Tax Treatment of Cryptocurrencies

    Outside the US, accounting treatment of cryptocurrencies varies. In the EU, a decision of the European Court of Justice rules that cryptocurrencies should be treated like government-backed currencies, and that holders should not be taxed on purchases or sales. In countries such as Germany and the UK, cryptocurrencies are treated like private money and not subject to tax outside of commercial use.

    What Do We Know For Sure

    What happened to Cryto Currency Market? What to do next?

    While it’s difficult to say which, if any, digital currencies will see dramatic price gains in 2021, we can say with confidence that cryptocurrency is not going away anytime soon. Blockchain, the underlying technology behind many cryptocurrencies, has spread far outside of the digital currency industry and is likely to see new applications this year. Governments and regulators will continue to grapple with how to best facilitate and control digital tokens.

    The heyday of cryptocurrencies may have come and gone, but it’s also possible that the crypto market still has a lot of upsides to go. We do know one thing for sure: cryptocurrencies were once positioned to upend the entire financial system. That kind of noise doesn’t disappear overnight, so expect to hear from cryptocurrencyor at least its number-one fansfor another year at least.

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    Tether Pumping Up Prices

    “Tethers are supposed to be all backed by dollars. There’s a lot of reasons like settlements with the authorities that suggest this has not been the case in the past, and we shouldn’t presume it’s the case now,” Gerard told Euronews Next.

    “So it looks like three billion Tethers, backed by nothing, were used to pump the Bitcoin price up at this particular time.

    “When they stopped, the Bitcoin price dropped. That’s basically the story of the shenanigans that went on in the last week or two”.

    Gerard argues this kind of market manipulation and fake liquidity happens all the time.

    “The basic thing that happened was the Bitcoin price, we know it’s highly manipulated because this is an unregulated pool for sharks,” he said.

    “I think some fake liquidity was deployed. About $3 billion worth of questionable liquidity was deployed, which was used to pump the price up.

    “That’s the sort of manipulation that goes on in the Bitcoin markets all the time,” Gerard added.

    “Normal people look at this stuff and think, ‘Oh, that’s a good market,’ but they’re the meat, they’re the suckers, and the money comes from.

    “This is a big boys game. And you’d better be prepared to be eaten alive,” Gerard warned.

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