$ 200 BILLION destroys cryptocurrency market in 24 hours as bitcoin value drops 22% – but experts say it’s a much-needed reset to avoid the “mother of all bubbles”
- Bitcoin cryptocurrency rose to a record high of nearly $ 42,000 on Friday to fall to $ 31,000 on Monday, wiping $ 200 billion from the cryptocurrency market
- But experts say the 22% drop is a much-needed “withdrawal” after an alarming “jump”.
- The total value of the cryptocurrency market reached $ 1.08 trillion for the first time on January 7, but fell to $ 880 billion by Monday
- Bitcoin jumped more than 900 percent from its lowest level of $ 3,850 in March
- Last week, the Bank of America warned that the unsustainable jump could be the “mother of all bubbles”
- Bitcoin, invented in 2009 by an anonymous person or group calling themselves Satoshi Nakamoto
More than $ 200 billion has been wiped off the value of the global cryptocurrency market after the value of bitcoin fell by more than 20 percent in just four days, setting alarm bells on Wall Street.
Bitcoin prices rose to a new record of nearly $ 42,000 on Friday, with a total digital coin market of about $ 1.07 trillion.
But on Monday, the value of bitcoins fell 22 percent to about $ 31,000, making the market worth $ 880 million.
However, experts say the sudden decline should be hailed as a “healthy correction” after the 12-year-old cryptocurrency jumped to volatile, record-high prices.
Bitcoin value rises 900% since March, Bank of America warns it could be “mother of all bubbles”
The value of bitcoin has fallen 22% in four days, from $ 42,000 on Friday to $ 31,000 on Monday, wiping out $ 200 million of its value, but experts say it’s a healthy reset
This chart shows the increase in the value of bitcoin in 2020, a meteoric growth that exceeded $ 20,000 for the first time on December 16. It later peaked at nearly $ 42,000 on Friday before dropping to $ 31,000 on Monday.
Last week, strategists at The Bank of America warned that the rapidly rising price of bitcoins could be the “mother of all bubbles”, comparing it to the technology boom of the late 1990s.
Naeem Aslam, chief market analyst at AvaTrade, said the decline was considered a welcome “health correction” that was “due a long time ago,” according to CNN.
James Putra, vice president of product strategy for TradeStation Crypto, added: “It’s scary when the price of bitcoins just goes up. This retreat was necessary.
Bitcoin first surpassed $ 20,000 in mid-December and jumped above $ 30,000 earlier this month; a huge rebound from a low of just over $ 4,000 when the Covid-19 outbreak sent global financial assets sharply down last spring.
In total, it jumped more than 900% from a low of $ 3,850 in March.
The massive cost of stimulus packages associated with Covid has raised concerns about rising inflation and the depreciation of the US dollar and investors flocking to bitcoin as a safe haven.
Prior to the crash, on January 5, investment bank JP Morgan said bitcoin had become a rival to gold and could trade up to $ 146,000 if established as a secure asset.
Many experts remain optimistic about the future of the digital currency, invented in 2009 by an anonymous person or group known by the pseudonym Satoshi Nakamoto.
Even with the crash over the weekend, bitcoin remains at 10% in 2021.
Research conducted by the University of Cambridge in the UK estimates that there are between 2.9 to 5.8 million unique users using a cryptocurrency portfolio in 2017, most of whom use bitcoin.
Cryptocurrency is gaining popularity with more mass investors, who are increasingly convinced that bitcoin will be a long-term asset rather than a speculative bubble, as some analysts and investors fear.
WHAT IS BITCOIN AND HOW DOES IT WORK?
What are bitcoins?
Bitcoin is a cryptocurrency – an online type of money that is created using computer code.
It was invented in 2009 by someone named Satoshi Nakamoto, a mysterious computer encoder that was never discovered or identified.
Bitcoins are created without the use of intermediaries – which means that no bank charges a fee when exchanging.
They are stored in so-called virtual wallets, known as blockchains, that keep track of your money.
One of the selling points is that it can be used to buy things anonymously.
However, this has left the currency open to criticism and calls for tighter regulation, as terrorists and criminals have become accustomed to trafficking drugs and weapons.
How are they created?
Bitcoins are created through a process known as “mining,” which involves computers solving difficult math problems with a 64-digit solution.
Every time a new mathematical problem is solved, a new bitcoin is produced.
Some people create powerful computers for the sole purpose of creating bitcoins.
But the number that can be produced is limited – which means that the currency must maintain a certain level of value.
Why are they popular?
Some people value bitcoins because it is a form of currency that cuts out banking intermediaries and the government – a form of currency exchange between partners.
And all transactions are recorded publicly, so it is very difficult to falsify.
Its value increased in 2017 – beating the “tulip mania” of the 17th century and the point boom of the early 2000s to be the biggest bubble in history.
But the bubble seems to have burst, and questions remain about what market there is for it in the long run.
Some shops and restaurants accept for purchases, but in general this is a small part of the market of the real economy.
Although there are concerns, bitcoins may be hacked.