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Bitcoin dropped as low as $30,000 Wednesday morning as confidence in cryptocurrency falters. The selling craze started last week and has ushered in fear and worry that crypto may not be the currency of the future, no matter what Elon Musk says.
Does this mean Bitcoin is a bad investment? Well, maybe.
Nearly all coins have dipped, including investor-favorites like Ethereum and Dogecoin, both falling around 50 percent Tuesday and into Wednesday. While things have normalized since, including Bitcoin finding a steady hand around the $40,000 mark, investor confidence has already plummeted. The cryptocurrency hasn’t seen trading prices so low since January.
The trouble started last week after Elon Musk posted the tweet that launched a thousand ships, with investors, large and small, pulling out of the crypto market. Musk, who co-founded Tesla, announced that the electric car company wouldn’t be accepting Bitcoin for Tesla purchases going forward, as concerns deepen over Bitcoin’s impact on the environment. Recent studies have pinned the mining of the coin as a serious factor in a surge of fossil fuel emissions, and the eco-friendly car company was adamant about pulling out.
Just like that, cryptocurrency was slashed, over $300 billion wiped off the market the day Musk’s tweet went viral. Then, as selling reached its peak Tuesday, almost $500 billion of the total value of crypto was squashed.
Reports claimed that Tesla, which was a huge investor of Bitcoin, dipped, selling its $1.5 billion in Bitcoin assets. In a panic, investors were following suit. However, Musk was quick to deny the allegations Wednesday, explaining that Tesla hadn’t gone away with its Bitcoin supply. “To clarify,” Musk said in a tweet, “Tesla has not sold any Bitcoin.”
To clarify speculation, Tesla has not sold any Bitcoin
— Elon Musk (@elonmusk) May 17, 2021
The selling frenzy was not only a product of Musk’s issue with Bitcoin mining but of Chinese banking and payment industry bodies, which issued a statement Tuesday warning financial institutions not to do business with cryptocurrencies, which included trading or exchanging fiat currency (regular dough) for crypto.
With all the negative sentiment around Bitcoin, it was no wonder that crypto would fall. However, that doesn’t necessarily mean it’ll stay down.
Bitcoin has had plenty of rises and falls before. Though it reached its historic height of $64,000 in April, it quickly flushed back down the drain to a steady $48,000 just a week later. A chart of the crypto’s past three months shows what looks like mountains, with peaks and plenty of dips. Though this morning’s dip was one of the worst ones yet, cutting the value of the crypto in half from its mid-April high, things will likely get better.
Cryptocurrency is volatile. It’s the nature of starting something new. Just as stocks are based on investor confidence, so are crypto prices. Right now, investors are afraid that the so-called value of Bitcoin and several other coins weren’t what they thought. When new companies begin to back cryptocurrencies and more products (like Tesla last month) put crypto on its price tag, things will start going back up. For now, negative press and tweets have soured the relatively new commodity. When conversations turn positive again, perhaps Bitcoin and other cryptos will make it back in the green.
As of now, prices are low. For some, this could be the perfect time to enter into the crypto market, buying throughout the dip and waiting until things start to go back to how they were throughout the first half of the year. For others, however, this dip is an indication that cryptocurrency trading is a scary and ultimately risky investment.
Overall, cryptocurrency, like Bitcoin, is only a bad investment when things spiral out of control like they did this week. With negative press and Elon Musk’s tweets determining crypto prices, things got bad fast. However, with more controls in place and a better sense of crypto’s place in the market, prices won’t be as volatile as they have been.