Cryptocurrencies decline again - should investors be worried now
Cryptocurrencies decline again; should investors be worried?
Tesla CEO Elon Musk announced on May 12, 2021, that the company would no longer accept bitcoin as payment for its vehicles.
His reasoning was that mining bitcoin requires a significant amount of energy, and it would be ironic for Tesla, a company dedicated to environmental protection through the sale of electric vehicles, to directly promote activities that could harm the environment.
Bitcoin, the most popular cryptocurrency, plunged 17.82 percent in the early hours of Wednesday, May 19. Ethereum and a few other altcoins were also impacted, with the former falling 45.54 percent.
You may be wondering how a single individual could influence the value of cryptocurrencies to some extent. To be sure, the reason is self-evident.
Recall that Musk reportedly announced on February 8, 2021 that Tesla would begin accepting bitcoin as payment for its electric cars in the 'near future' following a $1.5 billion investment. This investment was said to have pushed bitcoin's price to $43,000.
And on March 24, 2021, Musk tweeted that Tesla would begin accepting bitcoin as payment for its vehicles in the United States.
The news resulted in a surge in the price of bitcoin, which reached $56,000, delighting investors.
However, investors appear to have lost all their gains after the world's first cryptocurrency fell to less than $38,000 on Thursday morning, May 20.
While bitcoin and several other cryptocurrencies continue to bleed, investors are inconsolable.
Victor Asemota, a Nigerian entrepreneur and startup investor, responded on Twitter, "I retract. Cryptocurrency is now worse than stocks. I've squandered all of my gains this year and the most recent in a matter of hours.”
According to Faith*, a crypto investor, "there is no stable coin anywhere." Many people will stop trading cryptocurrency as a result of this. However, I have a question: after this, what else is there to lose? When everything is said and done, the only way is up.”
Meanwhile, Toyin, a four-year crypto trader, believes that crashes are a natural part of crypto investment.
“Every year, there has always been a crash. Some people are unaware of this, which is why they panic. “Crashes are natural,” he explains.
Decline of bitcoin prices over the years
Techpoint Intelligence calculated the percentage declines in bitcoin prices over the years.
There was a 67.17 percent decline in December 2018 compared to 64.33 percent in February of the same year. And a 44.87 percent decline was recorded in 2019. However, that is not all.
COVID-19 caused a 40% drop in Bitcoin in March 2020, following the collapse of major markets, including stock exchanges.
Similarly, the altcoin market declined, with Ethereum losing 39% of its value.
In 2020, the market capitalisation fell 52.25 percent, from over $260 billion to $126 billion. And now, after a 20.87 percent decline, the market capitalisation stands at $1.59 trillion.
When the market capitalisations of 2020 and 2021 are compared, what is happening now is not as significant as the March 2020 market crash.
Perhaps the dip is normal, and as some investors anticipate, the market will soon recover. At the time of publication, bitcoin had surpassed the $40,000 mark.
In response to the crash, a crypto trader reminded other traders via Twitter of the 83.5 percent crash in 2017 and how bitcoin traded at $3,230 from $20,000.
As previously reported, the Nigerian federal government issued a circular early this year prohibiting banks and financial institutions from facilitating payments for cryptocurrency exchanges.
However, as we previously reported, Binance, a leading cryptocurrency exchange platform, has seen an increase in African users on its platforms. The platform saw a 2228.21 percent increase in P2P users, with Africa seeing a 386.93 percent increase in P2P users.
Additionally, between January and April 2021, the volume of crypto-crypto transactions increased by 28.61 percent, while African users increased by 114.33 percent.
According to TechCrunch, Coinbase, the first cryptocurrency exchange to list on the New York Stock Exchange, experienced some outages due to panicked selloffs, affecting the company's share price.
Given the volatility of digital currencies, the cryptocurrency market is likely to experience a surge in the near future. However, one cannot help but wonder what will become of Africa's cryptocurrency users following the crash. Is there going to be a decrease or an increase? Ultimately, only time will tell.
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