What is the reason behind the fall of cryptocurrency?
Popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin witnessed a massive fall in their value on 19th March. The Bitcoin price dropped and it started trading for only Rs 28.5 lakh while Ethereum dropped to Rs 1.8 lakh.
Other cryptocurrencies like Dogecoin and Shiba Inu coins value also fell. Bitcoin fell over 38%. This crash in the crypto market was reported after China announced a ban on cryptocurrencies. Elon Musk also played a role in the crypto crash.
This electronic cash is like a digital asset. It is not controlled by third parties or any financial institute, but it can get influenced by changing dynamics of the market. The same happened with bitcoin, Ethereum, Dogecoin, and other cryptocurrencies. The restrictions imposed by the Chinese government caused a drastic fall in crypto trading.
Why is the Bitcoin price falling?
Bitcoin Price fell due to bans imposed by China. The bans or the restriction on cryptocurrency in China are not new. The restriction on cryptocurrency was imposed in September 2017 in China. The recent restrictions are further developed in earlier limitations.
New restrictions in China caused turmoil in the crypto market and caused the downfall of Bitcoin price.
Why China banned cryptocurrency?
Financial institutions and payment companies have been restricted by China to provide cryptocurrency-related services. These electronic cash holders need to understand that there is not a ban on cryptocurrency. The Chinese government considers cryptocurrency as a virtual commodity and does not recognize them as legal tender.
Chinese government-imposed restrictions on them in 2017 and banned Initial Coin Offerings (ICOs). The Chinese government justified this step by calling it a move to protect investors and curb financial risks.
Some rules have been expanded to curb loopholes that allowed finance and payment firms to trade in crypto. Services offered involving cryptocurrencies like registration, trading, currency exchanges, clearing, and settlement have been banned by three financial industry associations in China.
Banks and online payment channels in China have also been barred from providing crypto services. Cryptocurrency has been highlighted as virtual currencies in China which are not supported by any real value.
Elon Musk and Bitcoin
Elon Musk, the celebrity CEO, has a great impact on crypto trading. He has single-handedly changed the dynamic of the crypto market with just tweets. When Elon Musk tweeted last week that his company will not accept Bitcoin as payment citing long-brewing environmental concerns the market started falling and China's restrictions further break the backbone of the market.
Musk’s company Tesla has bought $1.5 billion (roughly Rs. 10,930 crores) of Bitcoin in March and later on, he started accepting Bitcoin as payment for Tesla’s car resulting in a 20 percent surge in the cryptocurrency.
Elon Musk is a big supporter of cryptocurrencies, and he has surged their prices with just tweets. Musk’s latest tweet has helped in reviving the crypto market and bitcoin rose back to $38,500.
A new crypto coin named ‘stop eloncoin’ has been launched in response to the fluctuations made in the crypto market by Elon Musk’s tweets. The crypto community accused musk of “irresponsibly manipulating” and responded against him with ‘stop eloncoin’.
Should you invest in cryptocurrency?
Cryptocurrency is very volatile. It is a much-used investment like gold as compared to a currency. However, many countries have started launching their own cryptocurrency. The prices of crypto can go incredibly high, but they can also fall quickly. So it is advisable that people invest as much as they can afford to lose.