- The price of Bitcoin has plunged by over 90 per cent to date since its all-time high in April 2021.
- China has recently intensified its crackdown on Bitcoin mining activities, putting downward pressure on Bitcoin prices.
- Dip in Bitcoin prices is prompting some bargain investors to tap the cryptocurrency at record-low prices in a FOMO-driven environment.
Ever since a significant fall in the prices of Bitcoin and other altcoins, obituaries are being written by cryptocurrency sceptics around the world. Some of these sceptics are celebrating a fall as if it is an end to the saga of Decentralized Finance (DeFi) that caught massive public attention in recent months. Having said that, pro-Bitcoin players are keenly eyeing overall fundamentals and technicals to take advantage of this dip.
The price of Bitcoin has tumbled by over 90 per cent to date since its all-time high in April 2021, wiping out trillion dollars’ worth of value from the cryptocurrency market. The recent pullback in Bitcoin prices fuelled a debate about whether the cryptocurrency market is on the brink of a 2018-like market crash or there is any value left in this asset class.
The beloved cryptocurrency slid below the US$30K mark recently for the first time in five months after China intensified its crackdown on cryptocurrency mining activities. Bitcoin reversed the substantial gains seen last week when Tesla CEO Elon Musk’s indicated potentially restarting transactions with the digital currency once mining is done with reasonable clean energy.
Overall, the magic internet money was seen to receive a new ray of hope for its widespread acceptance after El Salvador recently became the world's first nation to adopt Bitcoin as a legal tender. The adoption of Bitcoin in El Salvador could be seen in a similar light to corporations and institutions gradually embracing bitcoin earlier this year and last year.
Though the gains were not sustainable as IMF cited legal and economic concerns regarding the move by El Salvador to make bitcoin a parallel legal tender.
Why Bitcoin Prices Took a U-Turn in 2021?
The way Bitcoin’s prices were zooming up to dizzying heights in 2021, the market correction was widely anticipated by some experts. In fact, the sharp dip appeared to be normal by few analysts in the highly volatile markets like cryptocurrency space, which commonly occurs with short-term traders taking profits.
Bitcoin encountered new selling pressure after the local authorities at the southwest province of China’s Sichuan Province recently ordered a halt on mining Bitcoins in the wake of energy usage concerns. Lately, China reiterated its warning to crackdown on cryptocurrency mining in an effort to control financial risks.
Bitcoin faced another significant headwind earlier after the unexpected recovery of Colonial Pipeline’s cyberattack ransom, which fuelled concerns about the beloved cryptocurrency’s infallibility. The recovery of Bitcoin ransom perhaps undermined its libertarian and free-of-government-control case, raising alarms that Bitcoin is not as untouchable and secure as advertised.
Meanwhile, the retreat in Bitcoin prices in 2021 was also sparked by the US automaker Tesla’s unexpected decision against Bitcoin. Tesla recently reversed its March decision to accept Bitcoin as a mode of payment for its electric vehicles, citing environmental concerns. Tesla’s move broadly dashed crypto investors’ hope of widespread institution adoption of Bitcoin, stimulating a fall in its prices. Although, the Company recently hinted at using Bitcoin in future on clean energy conditions, pushing the cryptocurrency higher for some time.
Interestingly, Tesla’s CEO Elon Musk has long been a darling of pro-DeFi people owing to his immense support for cryptocurrency. However, the recent fall in Bitcoin prices made him lose some Defi fans who accuse him of manipulating the beloved cryptocurrency’s prices. Some news stories stating Musk had already sold all his Bitcoin holdings were also floating around.
Musk’s sudden shift from pro-Bitcoin to anti-Bitcoin approach has sparked some relevant questions in the mind of crypto lovers, which are yet to be answered. Was Musk not aware of the process of Bitcoin Mining beforehand? Was it a planned move to dupe the ordinary investors by timing the market and escape after making hefty profits?
At the same time, speculations are rife that Tesla’s reluctance in accepting Bitcoin as a mode of payment may give other conglomerates the jitters about facilitating payments through cryptocurrencies in a greener way.
Interesting Read: Decoding Musk’s bittersweet relationship with Bitcoin
What Lies Ahead for Beloved Cryptocurrency?
As ace value investor Warren Buffet says about Bitcoin, as long as there are speculators and buyers, the value of the cryptocurrency would keep going up. Dip in Bitcoin prices is prompting some bargain investors to tap the cryptocurrency at record-low prices in a FOMO-driven environment.
The recent entry of institutional investors in Bitcoin has further strengthened the case for long-term investors, who can potentially earn eye-candy returns over the coming years. However, one cannot neglect heightened risk levels and luck factor propelling such fortunes.
While the recent retreat has emerged as a huge blow to crypto enthusiasts who were hoping for Bitcoin’s wider adoption, it has also unlocked a ‘buy-the-dip’ opportunity for investors who missed the bus last time. The current scenario calls for a cautious approach on the part of investors while taking any leveraged positions in Bitcoin.