Bitcoin, the world’s most prominent cryptocurrency, have suffered some heavy losses lately, falling to less than $30,000, May 9, 2022, TradingView data shows.
At this point, the cryptocurrency was trading at its lowest value since July 2021. This represents a 50 percent decline from its all-time high of roughly $69,000 reached last quarter 2021.
In November 2021, its value exceeded over $65,000 following Tesla’s announcement that it had acquired 1.5 billion U.S. dollars’ worth of the digital coin as well as the initial public offering (IPO) of the U.S.’ biggest crypto exchange.
Speaking on the reason for the hike, Forbes say several analysts spoke to central bank money tightening, stating that this development was causing investors to flee risk assets.
Another reason, according to experts, was an electricity blackout in the Xinjiang region in China. This unexpected development led to a decline in the Bitcoin hashrate, how they are being mined, and potentially influenced investors into selling their assets.
Reports say central banks around the world have injected trillions of dollars’ worth of stimulus into the global financial system in order to shore up economic conditions during the global pandemic, while they maintain a low benchmark interest rates for years.
Read also: Why crypto trading defies CBN ban
However, Sam Rule, Market Analyst for Bitcoin Magazine, cited a wider range of macroeconomic variables as driving bitcoin’s recent price movements.
“Rising rates, a historic pace of monetary policy tightening to combat unprecedented levels of inflation, a strengthening U.S. Dollar versus other global currencies, and a deterioration in global growth outlooks are all macroeconomic forces at play that are driving bitcoin lower,” he said.
According to Rule, Bitcoin’s decline is primarily based on these macro factors and the rising risks of a global credit deleveraging that are at play, as opposed to its fundamentals, adoption, and growth potential.
Experts say investing in crypto coins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.
Unlike fiat currency like the U.S. dollar, Bitcoin’s supply is finite. As designed, BTC has a maximum supply embedded in it, and 89 percent had been reached in April 2021. It is believed that Bitcoin will run out by 2040, despite more powerful mining equipment.
This is because mining becomes more difficult and power-hungry every four years, a part of Bitcoin’s original design.
Sid Powell, CEO of Maple Finance, a Sydney-based institutional capital marketplace, spoke about the volatility in digital currencies, comparing innovative assets to the shares of technology companies and the compelling gains they enjoyed.
“What I think is important to keep in mind here is that, longer term, Bitcoin and the crypto industry more generally are undergoing a process that is quite different from what traditional equities are experiencing right now. The crypto world is experiencing a rate of adoption globally that is incredibly fast, perhaps at twice the rate at which the internet itself was adopted in the 90s,” Powell said.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
