What caused the massive drop in Bitcoin price?
After portraying an impressive bullish run for the better part of 2021 after several companies including Tesla, Microstrategy, Visa and MasterCard showed interest and invested in the crypto coin, Bitcoin registered a massive drop over the weekend after hitting an all-time of above $64,000 high on Wednesday.
Bitcoin dropped to about $62,000 after hitting the all-time high and while investors and traders thought it was just a normal correction before another bullish rally, the digital coin took a nosedive early Sunday to go to slightly above $52,000. This was a 15% fall taking Bitcoin to a three weeks’ low.
Altcoins also took a bow….
The interesting thing is that as Bitcoin prices dropped, the prices of most altcoins including that of ripple (XRP), Ethereum (ETH), Binance coin (BNB) among others also plunged.
Bitcoin prices have steadied today, Monday, at about $55,000
After the fall the market started on a high note today as Bitcoin prices corrected to above $54,000.
The other cryptocurrencies that had taken a hit also registered significant market price rises.
The market remains volatile as analysts figure out what could be the next move by the various cryptocurrencies including Bitcoin.
So, what caused the massive slide?
Bitcoin hit its all-time high after Coinbase, one of the largest cryptocurrency exchanges around the globe became the first cryptocurrency exchange on a stock exchange after it was listed on the Nasdaq stock exchange.
While there are speculations that the Bitcoin bubble is just about to burst, the market price fall prompted analysts to point to a variety of reason as to why the market took such a huge dive. Some of the reasons include:
- Regulation fears
This could be attributed to several reasons including the Turkish intent to ban the use of cryptocurrencies as a form of payment starting 30th April 2021.
There were also speculations over the weekend that the US Treasury was going to crack down on money laundering carried out using digital currencies.
According to the chief investment strategist at asset manager ERShares, Eva Ados, during an interview on Bloomberg TV,
“We will see more regulation coming … We think there is going to be even more volatility going forward.”
There was also the banning of cryptocurrency mining in Inner Mongolia a region that has been a favourite to cryptocurrency miners due to the availability of cheap energy.
- Correction after the overexcitement caused around Coinbase public listing
It is also very likely that the market got too unidirectional because of the hype that was created by the listing of Coinbase on the Nasdaq stock exchange and the pumping of some crypto coins like XRP, DOGE, and BSV. And therefore, it was only healthy for the market to take a retreat.
This was supported by Michael Novogratz, founder of Galaxy Digital, through a tweet.
- Power outage in china that significantly reduced Bitcoin mining activity
China houses some of the largest companies mining companies, and the power outage that occurred on Saturday significantly cut down Bitcoin mining since most of these companies could not mine Bitcoin blocks. This resulted in a reduction in the processing power of the Bitcoin network and it could be a factor in the price drop.