Bitcoin Price Hits Late-2020 Levels As Crypto Market Suffers Fresh Depression
A number of factors are driving the crypto market’s current slump, including high interest rates, the Coronavirus outbreak, and a slew of regulatory changes. Here are a few of the reasons why the crypto market is suffering right now: The selloff has also prompted investors to bet that the Fed will tighten policy even further.
Reddit boosts bitcoin price by 1,700%
A subreddit on Reddit, “WallStreetBets,” has become an investor’s haven. It’s also become a focal point for mainstream media. The recent GameStop short squeeze has captivated the minds of investors and financial regulators. The influx of retail investors has also benefited the currency.
Reddit users are also coordinating on the website to drive the share price of ailing companies, like GameStop. The result? Share prices in the video game giant soared more than 1,700% in January 2021, thanks to the influx of a small number of investors. However, the move was curbed when Robinhood, an online stock trading service, stopped purchasing GameStop shares. While the price surge was temporary, it was a sign of a Reddit vs. Wall Street confrontation that continues today.
Coronavirus crisis
In a recent report, the World Health Organization (WHO) stated that the COVID-19 coronavirus pandemic is the most severe since the 2007-2008 financial crisis. As a result, many countries are preparing for a severe outbreak. The first wave of this epidemic hit the southern part of England, where infection rates continue to rise. As a result, the number of hospital admissions has increased by almost 50%.
The cryptocurrency market has been seriously impacted by the COVID-19 virus outbreak. A massive selloff on March 8, 2020, caused the price of bitcoin to plummet by nearly $21 billion in a 24-hour period. This triggered a black Monday in the stock market on March 9, 2020. Meanwhile, much of Europe was already quarantined, and the rest of the continent was considering similar measures. The situation worsened two days later, when the World Health Organization declared the outbreak a worldwide pandemic.
High interest rates
The recent rise in interest rates has caused a dip in the price of bitcoin and other cryptocurrencies. The Fed is preparing to increase rates to combat inflation, and while this could help bring inflation under control, it also increases borrowing costs, which pushes down the price of stocks and cryptocurrencies. Experts say that the choppy price trend is likely to continue for the time being, as the market adjusts to the higher interest rates.
Bitcoin was one of the first cryptocurrencies to be bought by enthusiasts and investors. Many people hoped that it would be the gateway into a lucrative industry. Analysts and brokers were bullish, citing an expanding blockchain network and increasing investor interest. The options market also hinted at further gains. Meanwhile, the dollar was weakening on foreign exchange markets and governments did not seem likely to cut back on stimulus money. As a result, big corporations began to pile into bitcoin.
Regulatory changes
Bitcoin’s recent price plunge is largely due to the ongoing crackdown on cryptocurrency by governments across the world. Several countries, including China, have cracked down on cryptocurrency trading and mining, and the United Kingdom has also warned of the risks involved in such ventures. A recent article in Thailand addressed the allure of cryptocurrency investment and highlighted recent legislation that aims to regulate the industry.
The recent announcement that the Chinese government would suspend the licenses of cryptocurrency exchanges coincided with the lowering of Bitcoin prices. This news also impacted the CSEZFP’s ability to regulate offshore financial technology solutions enterprises and virtual currency exchanges. Although these measures will not affect Bitcoin trading in China, these changes could have an adverse impact on the cryptocurrency market in general.
