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Crypto has been causing a panic recently. Investors aren’t sure what to do: buy, sell, wait it out?
First of all, Elon Musk announced that Tesla would not accept crypto payments for cars, contradicting an earlier promise that they would. Musk reasoned that mining bitcoin requires a lot of electricity in order to power computers doing the work, and it would be detrimental to the environment to accept the currency. Musk said that Tesla had not sold any of its Bitcoin, and “Cryptocurrency is a good idea … but this cannot come at great cost to the environment.”
Bitcoin fell close to $40,000 after recently hitting a peak of $64,829 due to Musk’s decision. Another cryptocurrency, Ether, went down 8 percent to a value of $2,679; even Dogecoin fell 12 percent to $0.36.
Another reason we see this decline is China recently banned financial and payment institutions from providing digital currency services. Cryptocurrency trading has been illegal in China since 2019, but people have been able to trade Bitcoin online. On Tuesday, the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China warned that consumers would not be protected if they were to incur any losses from crypto-currency investment transactions. Although there aren’t many crypto users in China, more than 75 percent of crypto mining is done there. This has severely impacted the value of Bitcoin.
So now what? Do you sell?
Experts are saying no. Bitcoin stabilized on Thursday at $41,894. Jeffrey Wang, head of America’s at the Amber Group, commented on the situation, saying, “Crypto is an inherently volatile asset class, so swift and violent moves are going to happen over the course of time. This was a large flush out, and if the market wants to continue higher, it was likely necessary to remove some of the froth from overleveraged positions.”
“By itself, I don’t see that as a systemic concern at this point,” St. Louis Federal Reserve President James Bullard said.
Another expert, CEO of crypto consortium Panxora, Gavin Smith, said, “Bitcoin’s sharp price drop should come as no shock to the market. Any asset which has risen as much as bitcoin over the past year can be expected to have pullbacks as some investors withdraw profits like we’re currently seeing.”
Many new investors have pulled out, either leaving for gold or simply anxious about the drastic drop in Bitcoin value this week. However, ARK CEO Wood insists that Bitcoin will eventually climb to a $500,000 value. Cryptocurrency is extremely volatile, which we’ve seen when simple factors like Elon Musk’s tweets affect Bitcoin value. To sell because there’s been a drop would be to assume the value will never go up again. Financial experts highly suggest playing the long game and researching trends before considering selling your investments.
What if you want to start investing? Now is the perfect time to buy.