Why is crypto down today? How Bitcoin price has crashed amid fears over Evergrande crisis in China
The price of Bitcoin and other cryptocurrencies crashed on Monday, with some losing more than 10 per cent of their value.
Bitcoin fell from around $47,000 (£34,400) to $41,600 (£30,400) according to Fintech Zoom data. It recovered slightly on Tuesday, climbing back to $43,000 (£31,400).
Ethereum fell from $3,300 (£2,400) to $2,900 (£2,100), and Cardano also suffered big losses.
The crash prompted El Salvador’s President, Nayib Bukele, to encourage people to “buy the dip”.
El Salvador became the first country in the world to officially announce Bitcoin as a form of legal tender two weeks ago.
“We just bought the dip. 150 new coins! El Salvador now holds 700 coins,” Mr Bukele tweeted.
“They can never beat you if you buy the dips. Presidential advice.”
It’s important to note the volatility of the currency which has seen large rises and falls throughout its history.
People invest at their own risk and Bitcoin and other cryptocurrencies are not regulated by British financial authorities.
The Financial Conduct Authority (FCA) warned in January: “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money.”
Why did cryptocurrency crash?
One of the most important factors is believed to be the possible collapse of the Evergrande Group, a property company in China that is facing a debt of $300 billion (£219bn).
The crypto crash is also in-line with losses seen in the stock market, with experts believing cryptocurrencies are starting to behave more like traditional assets.
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, told Fintech Zoom: “With the influx of institutional investors and a general overlap of market participants, we’ve seen the markets becoming increasingly correlated.
“Moving forward we are likely to see such correlations strengthen further as the pool of market participants across traditional and crypto markets becomes more homogenous.”
What could happen next?
Crytocurrency is notoriously volatile, making it very difficult to predict what could happen next.
Bitcoin could recover to a record price, or it could crash and never return. This is what makes it a risky investment, and you should only ever put in what you can afford to lose.
Vinny Lingham, cofounder and CEO of Civic, told Fintech Zoom he believes cryptocurrency’s long-term prospects still look strong.
“All liquid assets get affected when global markets are disrupted. We saw this at the start of Covid,” he said.
“Crypto is not immune, but will probably outperform other assets in the long term as money going into crypto is hedging against other risks in the broader economy.”
Read here about Ethereum price.
And here about markets data.