Cryptocurrency holders worldwide are in panic as Bitcoin, the world's largest cryptocurrency, tanked by close to 40 per cent from its record high levels to US $31,000 on Wednesday, a level last seen in February this year. A week ago, it was trading above $55,000. The other two popular cryptocurrencies -- dogecoin and ethereum have also fallen by 45 per cent and 40 per cent, respectively. Experts blame Tesla CEO Elon Musk's tweets and China's recent action on the crypto front for the great fall.
"The combined impact of global sell off, Elon Musk's crypto reassesment and China's action is behind the Bitcoin price drop," says Shivam Thakral, CEO, BuyUcoin. However, he asks to treat China's event as an isolated event. "Any knee-jerk reaction to China's action should be avoided. Dow Jones and major indices are down too," Thakral adds.
On Tuesday, China banned financial institutions including banks and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.
One Twitter account every crypto holder follows is Tesla CEO's. A tweet by Musk saying Tesla will no longer accept Bitcoins started the sell-off in crypto market. He clarified in another tweet that he remains a strong believer in crypto, but it doesn't seem to impress Bitcoin holders and it has been falling in price since then.
Though the fall looks dramatic, it is normal in many volatile markets, including crypto, especially after such a large rally, according to industry experts.
"Such corrections are mainly due to short-term traders taking profits. Long-term value investors might call these lower prices a buying opportunity, as MicroStrategy just did. Technical analysts would call this a test of the support level around $40,000," says Avinash Shekhar, Co-CEO of ZebPay.
The cryptocurrency market was on fire with the price of Bitcoin soaring 10 times from around $6,000 in April last year to over $60,000 in April this year.
The dip provides investors a buying opportunity, says Thakral. However investors should educate themselves before buying into it just like they would do before buying a stock.
Some industry experts recommend building a long term portfolio by investing in crypto currencies in a disciplined manner via SIP, like in mutual funds.
"Use strategies like rupee cost averaging and SIPs to more confidently manoeuvre through volatility and take a long-term view," advises Shekhar.
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