Why did virtual currency crash again

2022-04-26 0 By

Source: Economic Daily
Li Hualin, A reporter from Our Newspaper, Bitcoin is at the same time…Fell.Recently, Bitcoin ushered in a “waterfall” plunge, from January 21 to January 24, from around $43,000 all the way down to around $33,000, a cumulative drop of more than 23% in four trading days, setting the worst start to the year since 2012.Besides Bitcoin, other virtual currencies have not been spared.Ethereum, the second-largest virtual currency by market value, plunged more than 30 per cent from around $3,200 to below $2,200.Dogecoin and SHIB are also in a sharp decline, and nearly 10 billion yuan of virtual currency has gone up in smoke in the whole online trading market. Voices such as “Bitcoin crash” and “cold winter in the currency circle” have been heard one after another.In fact, the cycle has been volatile for nearly three months.Since hitting a record high of $69,000 in early November 2021, bitcoin has fallen 50% from its peak to date, and the total market value of virtual currencies has shrunk from a record high of $2.9 trillion to around $1.9 trillion.For the virtual currency slump, market analysis, is the result of multiple bearish factors resonance.”On the one hand, the Fed’s interest rate hike accelerated, and the tightening of monetary policy in many overseas countries caused risk assets to fall sharply.In addition, the virtual currency market is increasingly correlated with the US stock market, and the recent decline of the US stock market also drives the entire virtual currency market down.”Said Zhao Wei, a senior researcher at OKX Research Institute of Oui, a well-known digital asset trading platform.The recent recession, on the other hand, although the virtual currency market, but the NFT (non homogeneous tokens) market is hot, more and more organizations hope to “rich”, try to swap the assets of the investors for NFT, some of them have get expected by NFT sell your assets after the cash out, increase the market selling pressure.Virtual currencies are also facing increasing regulatory pressure from around the world.Recently, regulators in many countries said they would take measures to strictly monitor virtual currencies.Russia’s central bank said it would propose a ban on virtual currency trading and mining, and a ban on financial institutions investing in virtual currencies and related financial instruments.The European Union’s top financial regulator has called for an EU-wide ban on major forms of Bitcoin mining.Regulators in the UK, Spain and Singapore have all said they need to tighten controls on promoting virtual assets to less experienced investors.In China, regulatory policies for virtual currencies continue to increase.Since last year, the Central bank and other departments have introduced a series of policies and measures, banning financial institutions from engaging in and participating in virtual currency-related businesses, clearing and banning domestic virtual currency trading and token issuance financing platforms, and stepping up inspections and regulations on “mining”, all in an effort to dampen the “false fire” of virtual currency speculation.Bitcoin and other virtual currencies have been falling on the back of multiple negative news, including the continued spread of the novel Coronavirus strain of Omicron.Zhou Maohua, macro researcher of financial Market Department of Everbright Bank, said that virtual currency has no real value support, does not have the sovereign credit of legal tender, and lacks a wide range of application scenarios, and its price trend is highly susceptible to market news.Looking back at the history of Bitcoin, the rise and fall has been its consistent performance.Changes in regulatory direction, the buying and selling of a few big investors, or even a word from some people, can cause drastic fluctuations in its price, resulting in a “stampede” of massive selling in a short period of time.Bitcoin, for example, hit a record $19,000 in December 2017 before falling in price, briefly falling below $3,000, down 80% in a year.On January 11 last year, bitcoin fell from nearly $40,000 to $30,000, plunging nearly 20% in a single day, with more than 200,000 people losing their money.”The wealth creation myth of virtual currencies has attracted many investors to participate in speculation, but in the past, the volatility of virtual currencies is several times that of ordinary stocks, and some leveraged participants’ wealth has been ‘looted overnight.'”Zhou maohua said that the characteristics of virtual currencies make it difficult to use traditional valuation methods such as fundamentals to analyze them, and they are more like high-risk alternative speculative products, which are not suitable for ordinary investors.”In China, bitcoin and other virtual currency transactions are not protected by law. Regulators have long made their attitude clear, and investors need to guard against potential risks.”Zhou Maohua said that under strict supervision, the current domestic initial coin offerings (ICOs) have almost been cleaned up, and “mining” activities have also ceased, but many platforms and institutions have moved overseas to continue their activities.In order to better prevent and defuse the risks of virtual currency trading and speculation, it is still necessary to strengthen international regulatory cooperation, share regulatory information and solve many difficulties in cross-border supervision of virtual currencies.At the same time, efforts should be strengthened to remind investors of the speculative risks of virtual currency.In addition, the development of virtual currency technology should be further tracked, and the pace of legal digital currency research and development and promotion should be further accelerated.