Since the emergence of Bitcoin in 2009, there have been various things that have caused the price of crypto to fall. By knowing the background behind the historical decline, you might be able to predict how crypto will move in the future if something similar happens.
In this article, we have summarized some of the causes of crypto prices dropping according to experts. Read more!
Restrictions on the Use of Bitcoin by Entrepreneur Elon Musk
CNN Business' Rishi Iyengar revealed that one of the reasons crypto prices fell in 2021 was due to a statement from Elon Musk, a tech entrepreneur announcing that bitcoin transactions were considered invalid and not allowed to buy Tesla cars, a product made by his company.
Elon Musk's statement managed to create significant price fluctuations that made people wonder, "why did the price of crypto all go down?" at that time.
According to Elon Musk, transactions using bitcoin go against his company's vision. The use and mining of bitcoin requires a super fast computer and a lot of electricity.
Elon Musk underlined that the electricity generated by burning coal can damage the environment.
Government Pressure: Chinese Government Ban on Cryptocurrency Use
Meanwhile, according to The Motley Fool, the price of bitcoin dropped dramatically when the Chinese government officially banned payments to banks and institutions using cryptocurrency.
Not only Bitcoin, the Chinese government also prohibits payments with any crypto assets in transactions on the Chinese market.
As a result, a number of Chinese banks declared the blocking of all access to cryptocurrency transactions, both local and international.
The government and banks agree that cryptocurrencies are only considered as virtual currencies that actually have no real value.
Rise in Benchmark Interest Rates and Central Bank Pressure
This factor can be observed in the phenomenon that occurs in 2022. According to Global Block analyst Marcus Sotiriou, investors' response to the planned increase in the benchmark interest rate by the American Central Bank, the Fed, was the cause of crypto's decline a few months ago.
Many crypto users and investors are also confused about deciding to invest in crypto products or Central Bank products.
Other pressure also emerged from the Central Bank of Russia. Recently, there has been talk about banning the use and mining of cryptocurrencies in Russia.
Cryptocurrencies are considered to be a threat to the financial stability, welfare of citizens and the sovereignty of Russia's monetary policy in the future.
Negative Sentiment of Investors and Other Parties to the Future of Crypto
According to a LiveMint media report, investors' views influence the fate of cryptocurrencies, including the ups and downs of crypto assets such as bitcoin, ethereum, etc.
At the beginning of 2023, there were some negative sentiments from global investors regarding the policies that will be imposed on crypto assets by world countries.
Quantum Economics analyst Jason Deane also mentioned the same thing regarding how market sentiment affects crypto prices. The negative sentiment itself has actually existed since the beginning of the emergence of Bitcoin.
Deane is optimistic that in the future this kind of sentiment will fade away. But in the short term, negative sentiment will greatly affect the fluctuation of crypto assets.
Leverage Games
This factor analysis can also be observed in the recent decline in crypto asset prices. Founder of IDX Digital Assets, Ben McMillan, said the cause of Bitcoin's decline may be due to leveraged long positions.
Simply put, leverage is borrowing capital from a broker or exchange. Leverage itself is one of the strategies of investors to use debt (loan capital) with the aim of increasing their own investment return opportunities.
This strategy has an impact on the movement of assets in the major crypto markets. According to McMillan, this will at least increase the sell-off to the Asian Session Market on January 21.
Leverage is a legitimate thing in an asset development strategy. Traders can get maximum profit even though their personal capital is relatively small. However, traders cannot take loans arbitrarily.
The brokers and exchanges are the ones who actually take advantage of this situation. Therefore, as outlined by McMillan, leverage might suppress the rampant sell-off when the market is full of traders with small capital and cause crypto prices to fall.
Well, that's the opinion of several experts regarding the reasons and causes of crypto prices falling. Of course, these factors are only opinions and no one can say for sure why crypto prices fell and how crypto prices will go in the future.
However, to increase your profit potential in the trading world, it's a good idea to learn crypto from scratch starting from scratch understanding of what blockchain is, what is bitcoin, and other information.
