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Why cryptocurrency stocks collapsed today



What happened

Many investments with hooks in the cryptocurrency market fell sharply on Friday, after an 11.6% drop in bitcoin prices in 24 hours.

Company

Bitcoin connection

Maximum price drop on 15.1.2021

Riot Blockchain 09.30 NASDAQ: RIOT

Bitcoin digging

15.2%

CleanSpark (NASDAQ: CLSK)

Bitcoin digging

1

5.1%

Bitcoin in gray rock (OTC: GBTC)

Investment trust with bitcoin assets

12.4%

Ebang International (NASDAQ: EBON)

Makes specialized computers for bitcoin mining

11%

Marathon patent group (NASDAQ: MARA)

Cryptocurrency extraction

10.6%

MicroStrategy (NASDAQ: MSTR)

Converts $ 1.13 billion of long-term cash reserves into bitcoin

9.0%

Data source: Yahoo! Finance.

So what

Bitcoin prices have risen sharply since the beginning of October 2020, rising from approximately $ 11,000 to over $ 40,000 per token over a three-month period. Since reaching a peak on January 9, bitcoin prices have risen over the past week and a half. There was a big drop on Monday, January 11, and a pretty steady climb back for the rest of this week. Token prices almost reached $ 40,000 again before falling again today.

Cryptocurrencies have caught the attention of major investment companies this year, a major reason for the big profits of bitcoins in recent months. At the same time, big names can cause a sudden drop in prices from time to time. Today, the investment company UBS Global Wealth Management reminded investors that the bitcoin rally could end in tears. Cryptocurrencies are risky and volatile, and investors may end up losing everything they invest in this unproven asset class.

“We don’t think it’s enough to stop the price of cryptocurrency from reaching zero when a better-designed version is released or if regulatory changes stifle sentiment,” wrote UBS analyst Michael Boliger.

This was enough to cause a sobering drop in prices, which also hampered many stocks that followed bitcoin upwards.

A red arrow for graphics that goes down in front of a floating coin with the bitcoin logo.

Image source: Getty Images.

Now what

Boliger is right, of course. The regulatory framework for cryptocurrencies is still evolving, which increases market uncertainty. Investing everything in a cryptocurrency is a very bad idea, because a better version can really replace the bitcoins at the top of the pile. I’m not saying that will but the risk is not zero. If you are investing in cryptocurrencies today, it is best to divide your holdings between bitcoin and several other reputable names such as Ethereum and Litecoin. All major names happen to fall today, but their performance can vary considerably from time to time.

However, do not cry for bitcoin specialists. With the exception of the Ebang International micro-cap, they all performed extremely well during the current bitcoin boom. Trust Grayscale Bitcoin Trust has earned 347% in the last 52 weeks, and MicroStrategy has grown by 331% over the same period. Shares of CleanSpark reported 614% growth. And if you think those results are impressive, we haven’t even talked about Riot Blockchain’s 1,964% return or the crushing 2374% Marathon winnings. All this is after going through the significant hairstyles on Friday.

Cryptocurrencies can be fun, exciting and profitable – but you can also lose sleep because of their risky nature and sudden price drops. You can’t bet on these promising assets without taking a big chunk of risk. Today just wasn’t a good day for bitcoins and friends.




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