Bitcoin’s recent price crash has seen trillions of dollars wiped from the value of the currency, one of the milestones of the crash was Bitcoin dropping below $20,000. In recent years $20,000 has become a benchmark amount for the currency’s value with experts citing it as a point at which it would not be healthy for the Cryptocurrency to drop below. When this happened during the recent price crash, it set headlines blazing across the world’s media and brought home the impact the bear market faced by Bitcoin was having within the wider world of Cryptocurrency trading.
Bitcoin’s Historic Price Increases
Bitcoin has been troubled recently, and prices have fallen, but it had gained significant value in the years preceding this current downturn in value. Bitcoin got its inflated value from some buoyant trading in the last few years. The Cryptocurrency started the rally that took it to its highest value achieved to date started back in the last few months of 2020 when the Cryptocurrency started surging in value, it looked unstoppable for a while. Achieving an all-time high price of $64,400 per Bitcoin, but that was back in mid-November 2021 and things have changed significantly since then. The Cryptocurrency had been on the increase since its previous crash had reversed the trend and the value had started increasing again in mid-January 2022 that was until the 1st of April 2022 when the value of the currency started to plummet downwards at an alarming rate.
Prices Start Falling
The recent Cryptocurrency crash began after investors spread over a number of different Cryptocurrencies were spooked by unusually high inflation and news that the US Federal Reserve was intending to raise the interest rate. The market began its downward tumble, gaining speed when Celsius, a large crypto lender, announced it was stopping all withdrawals. This gave doubts about the firms’ future and increased hurried selling in the crypto markets. The Three Arrows Capital hedge fund sold $40 million Ether tokens and was known to have a very large stake in Luna, the stable coin that recently collapsed. This collapse has continued and the drop of Bitcoin value to below $20,000 is likely able to trace its roots back to these earlier events. The Luna collapse has shown a market already concerned that Cryptocurrency is becoming unstable and that deregulated finance is very risky. The Luna collapse is likely to have been triggered by investors who should have been stabilizing Luna’s value, were instead spooked and were selling their tokens as fast as they could leading to inevitable collapse.
Preventing Future Crashes
For the Cryptocurrency market to become mainstream and for people to adopt Cryptocurrencies as their regular method of paying for goods and services, there would need to be a massive shift in stability. People need a token of value that they use regularly to maintain its relative value over time. It would not be good to have to rely on an unstable currency for paying wages or paying your taxes, so in this regard, Cryptocurrencies are a long way from universal adoption like traditional currencies. For Cryptocurrencies to transition into the mainstream there would need to be regulation to control the crypto industry and its tokens. This regulation that is missing from Cryptocurrency trading has not missed other industries that have seen regulation in recent years to bring safety and security to customers. This is most true in the gaming industry, which sees the sector heavily regulated. Cryptocurrencies don’t face the sort of regulation that UK slot sites do, which some experts suggest is the reason for their extremely volatile nature and ultimately the many crashes in value it has seen.
With suitable regulations in place, investors would be more likely to trust in market stability and retain their investments. But this volatility in the crypto market is also the same volatility that has seen the values of crypto coins and tokens increase so rapidly. The lack of regulation that comes with Cryptocurrencies is for some their biggest attraction. Finance can be moved from one account, or place to another easily and with low fees. The anonymity that Bitcoin offers is another key reason some choose to use the currency. If the various currencies that make up the crypto market were suddenly regulated in the same way as the gaming industry, this would likely drive these customers away and this would undoubtedly impact the industry’s overall worth. Finding a balance between customer anonymity and maintaining security is something that will take time to resolve and we will need to wait to see if the Cryptocurrency market will be more stable in the future.
The Future
No one can really predict if Bitcoin can maintain a plus $20,000 value, or if in the future instability will return any gains to earlier lower figures. There are so many variables faced by not only the Cryptocurrency market but investment in general. Regular shares have seen losses in their values recently and these have been attributed to global economic conditions. The war in Ukraine has brought with it a change in the way energy supplies are distributed over the planet. With international energy trading so important to much of the global economy’s wealth and stability it’s no surprise that this has resulted in a bearish market for various investments and their investors. It is still unclear how the new future of energy distribution will play out and it may bring instability to investment markets for some time to come.
Benchmark figures like Bitcoin’s $20,000 threshold are held as important markers within Cryptocurrency trading, but with a very different picture for all sectors of investment recently it may be appropriate to take Bitcoin’s fall as part of a bigger picture of the world economy. If you are thinking of investing in Cryptocurrency be sure to research your investments well and never risk more than you can afford to lose in what remains an unstable market.
