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Tuesday, March 28, 2023

Bitcoin Crash Wipes out Nearly all Gains for 2021

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The price of bitcoin continues to swoon, sliding below $30,000 in early trading on Tuesday and giving up nearly all of the digital currency’s gains for the year, according to Coindesk.

Proponents of cryptocurrencies have touted their upside as investments as well as their potential utility in global commerce. Wall Street banks including JPMorgan Chase and Goldman Sachs have allowed clients to invest in bitcoin.

Cathie Wood, the CEO of ARK Investments and a prominent crypto booster, in November predicted that the price of bitcoin could reach $500,000.

Yet the roller-coaster trading has also brought warnings from financial analysts.

“When investing in cryptocurrency, it’s important to remember that volatility is the name of the game,” Bankrate.com analyst James Royal.

“Volatility is magnified, on the upside and downside, by the fact that the price is driven heavily by trader sentiment, and traders can quickly swing from rabid optimism to gloom and doom.”

Bitcoin prices were already under pressure this spring when the Chinese Banking Association on May 18 ordered the country’s financial institutions to stop providing cryptocurrency services because of extreme volatility.

The move rocked digital currency prices, with some coins losing more than 20% of their value overnight.

Musk, the CEO of electric car maker Tesla, has also seemingly influenced bitcoin this year. The price shot up in February after he announced that Tesla had bought $1.5 billion worth of bitcoin and continued to climb the following month when the company started accepting the asset as payment for its vehicles.

But crypto prices slumped after Musk abruptly reversed course last month and declared that Tesla would stop accepting bitcoin, citing the environmental impact of “mining” bitcoin.

The massive computing power needed to produce the cryptocurrency consumes as much electricity in one year as countries such as Malaysia, Sweden or Ukraine, according to the Cambridge Bitcoin Electricity Consumption Index.

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