Bitcoin, the world’s largest cryptocurrency tumbled to three-and-half months low on Wednesday. In early trading, the best known cryptocurrency plunged over 50% to $30,066 from its record high of $64,895 hit on April 14. However, bitcoin had risen back later to about $38,500 by 10 pm UK time, according to Refinitiv. Ethereum, the coin linked to the ethereum blockchain network, dropped nearly 57% to $1,850, its weakest level since late January. Meme-based dogecoin also slumped, losing nearly 26% to $0.35, according to Coingecko.
The decline in the cryptocurrency world started with Elon Musk‘s tweet last week: Tesla will not accept bitcoin as payments anymore. On May 13, he had announced that Tesla will no longer allow vehicle purchases using bitcoin due to environmental concerns. His follow-up tweets caused further confusion over whether the famous electric carmaker had shed its holdings of the coin. China’s recent announcement banning financial institutions and payment companies from providing services related to cryptocurrency transactions aggravated the bloodbath in the market. At one point during the meltdown, nearly $1 trillion was wiped off the cryptocurrency’s market capitalization.
“Price corrections are part and parcel of every asset class and bitcoin is no stranger to the same," said Neeraj Khandelwal, chief technology officer (CTO) and co-founder of CoinDCX.
“If you look at the year-on-year appreciation in Bitcoin’s prices you would see steady growth. Bitcoin’s stellar rally from its early April 2013 lows of $50 to having appreciated by over 1300 times to its recent high of $66,000 in mid-April 2021," Khandelwal added.
“Recent comments by some Industry stalwarts such as Elon Musk might have also contributed to some corrections in the pricing. Moreover, the recent ban on crypto related transactions imposed by the Chinese government seems more of a precautionary measure since it doesn’t stop Chinese people from holding the currencies," he explained.
“With the immense interest from the investors as well as crypto developers’ communities across the world, we feel that the situation will stabilize soon, and the government bodies will be able to see the prospects the crypto industry offers," Khandewal is hopeful.
Buy or Sell: What should crypto investors do now?
For cryptocurrency investors, CoinDCX co-founder said, “Bitcoin is a store of value and should be treated as an asset class with a long-term forecast on gains. In term of investment, we have always maintained that investors should focus on the fundamentals and the long-term nature of the asset class rather than looking at short-term volatility.”
“A nearly 40% dip in the bitcoin price from its all-time high looks dramatic but is normal in many volatile markets, including crypto, especially after such a large rally. Such corrections are mainly due to short-term traders taking profits. Long-term value investors might call these lower prices a buying opportunity," Avinash Shekhar, co-chief executive officer of ZebPay.
“Technical analysts would call this a test of the support level around $40,000. Investors should invest in education first. Research the underlying value of Bitcoin, Ethereum, and other crypto assets as you might look at a company’s information before buying stocks. Use strategies like rupee cost averaging and SIPs to more confidently manoeuvre through volatility and take a long-term view," he added.