The price of the popular digital currency, Bitcoin, fell to 30% on May 21, 2021, when the China Banking Association advises banks about the risks associated with cryptocurrencies. The decline of around 10% was observed in the afternoon of May 21, but it was estimated that Bitcoin had lost more than $70 billion in a day at the end of the day. On April 13, bitcoin hit the new record of $64,800, but it lost around 37% of its value in a month. You can earn daily profit by trading bitcoin through Oil Profit.
Investors were shocked to notice the warnings of the China Banking Association. Still, just after Association announced, Tesla Co. announced their decision not to accept the bitcoins and altcoins as a medium of exchange for cars. This created chaos in the crypto market, and there were murmuring about the regulations and restrictions getting tighter on digital currencies put a lot of pressure on bitcoin. Still, in comparison with 2020, the price was bitcoin was up around 31% in 2021.
Here in this article, let’s learn about digital currencies and bitcoin in general.
Working of Bitcoin
Bitcoin is a cryptocurrency or digital currency that doesn’t engage the government or banks for its work and allows its users to make peer-to-peer transfers anonymously. Bitcoins are digital coins that aren’t printed but mined using a vast network of computers and by lending high computing power to verify the bitcoin transactions. Increased computing power is used by users known as miners rewarded with bitcoins in exchange for their work and efforts.
Digital coins can be purchased and sold on crypto exchanges using fiat currencies or other digital currencies. Many businesses started taking bitcoin as a payment method, and multiple financial institutions have allowed digital currencies in the portfolio of their clients. However, if we see overall, the mainstream acceptance of bitcoin and other digital currencies is still limited in 2021. Bitcoin is a computer code required to be signed digitally using private keys every time these coins travel from one user to another.
It is a decentralized currency that allows anonymous transactions, and bitcoin enthusiasts, criminals, and speculators make it a popular currency. Bitcoins are stored in digital wallets or crypto exchanges. There are only 21 million bitcoins that will ever exist in the economy, out of which about 19 million are already circulating.
Why did bitcoin’s price decline?
On May 19, the Chinese Banking Association’s website posted that all banks or financial institutions should decisively abstain from offering digital currency services to their users or clients because of the volatile nature of digital currencies. In reality, after the group statement posted by Banking Association, almost all the cryptocurrencies fell. On the evening of May 19, Bitcoin was down over 7%, pricing at $40,310, whereas other cryptocurrencies also lost their values. Along with the price of cryptocurrencies, the shares of crypto exchanges also dropped.
It is not abnormal for bitcoin’s value to charge in a short time as it is a volatile market where there are wild swings that occur in a day. For example, in 2020, on the last trading day, bitcoin’s value was closed under $30,000, whereas in April 2021, its value was around $65000.
What is the role of Elon Musk in the crypto market?
Elon Musk plays a significant role in the crypto market. In February 2021, Musk announced that Tesla Co., the car company, has invested around $1.5 billion in bitcoin. In the next month, Tesla announced that it started accepting bitcoin payments. Every tweet made by Elon Musk has affected bitcoin’s price, and even Elon promoted Dogecoin, digital currency.
However, Elon Musk was only in favor of bitcoin for a short time, and everything reversed after he announced in May 2021 that Tesla Co. had paused to accept bitcoins. The decision is made because mining bitcoin causes a lot of damage to the environment. As soon as Elon Musk announced, Tesla’s price dropped below $50,000, and it set a pullback on many cryptocurrencies.
But are public companies using bitcoin?
Most public companies like Square, Microstrategy, and more are accepting bitcoin and other digital currencies. Even Mastercard said that it’d start supporting cryptocurrencies on its network. However, Bitcoin is still highly popular, that there are around 300,000 transactions that occur on an average day.