Technology
Cryptocurrency crash ‘wiped out a TRILLION dollars of wealth’, say experts
THE global cryptocurrency market has shed over $1TRILLION since November due to a series of devastating crashes in recent weeks.
According to Bloomberg, Bitcoin alone lost more than 12 per cent of its value on Friday and dropped to its lowest level in six months.
AlamyBitcoin has dropped to its lowest value since July 2021[/caption]
It currently sits at around $34,000, down 45 per cent from a peak in November. Other currencies have lost the same if not more value in that time period.
Experts claim the shock crash is the result of a crackdown on cryptos from Chinese and Russian governments and the US Federal Reserve wanting to raise interest rates.
Crypto expert Edul Patel claimed the current bottoming-out also had to do with a lack of demand amid soaring inflation in the West, leaving casual investors in a state of panic.
Bloomberg said that Bitcoin’s decline over the past two months has wiped out more than $600billion in market value.
Aggregate crypto markets have shed $1trillion. It marks the second largest loss in dollar terms for both, according to Bespoke Investment Group.
“It gives an idea of the scale of value destruction that percentage declines can mask,” wrote Bespoke analysts in a note.
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“Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically.
“Given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”
Bitcoin and Ethereum plummeted $200billion last week after Russia promised to crackdown on the lucrative cryptocurrencies.
The two most-trusted cryptos went into a dramatic freefall on Wednesday with other, smaller coins following suit.
Bitcoin had not previously sunk below $40,000 since early August 2021, during a long and painful summer slump.
But within minutes it had trampolined back to $41,000 as investors appeared to rally behind the coin.
Bitcoin’s market cap briefly hit a low of $750billion at 2.40pm Greenwhich Mean Time (9.40am Eastern Time), its lowest valuation in months.
Yet by 2.54pm GMT (9.54am ET) it had recovered to $775billion, above its pre-crash market cap.
After 3pm GMT (10am ET) Bitcoin began to fall again, with investors fearing a double-dip collapse.
The risks of buying with cryptocurrencies
Investing and making a purchase in cryptocurrencies such as Bitcoin is risky .
Their value is highly volatile and City watchdog the Financial Conduct Authority has warned investors should be prepared to lose all their money.
Investing in cryptocurrencies is not a guaranteed way to make money.
You should also think carefully about making purchases with a cryptocurrency.
For example, Bitcoin has had wild price fluctuations in recent months and the price can change on an almost hourly basis.
The price of a Bitcoin was at $40,258 on January 9, according to Coindesk, but fell to $34,214 just three days later.
That’s a 15% drop.
These price swings are risky for a business as you could sell an item for a Bitcoin at one price and the value may drop soon after, leaving you with less money from a sale.
Similarly, the price of Bitcoin has soared by more than 21% since the start of this week so it can be hard for a shopper to get an accurate idea of the price of an item if its value changes on a daily basis.
It is now wavering around the $41,000 mark – but there’s no indication where it will go next.
The bounce is just the latest sign of the cryptocurrency market’s incredible volatility.
Bitcoin also fell last night after the Kazakh government switched off power and miners clashed.
Its value is now floating around $40,000, down from $69,000 in early November last year.
As by far the biggest cryptocurrency, Bitcoin trends can have ripple effects across the world of crypto.
The coin has struggled amid uncertainty in the wider US economy, with the Federal Reserve discussing hiking interest rates in March – sooner than expected.
The latest plunge follows a crypto crash at the start of December, shortly after Bitcoin hit a record value of $69,000 in November.
Bitcoin has now lost one-third of that value.
Bitcoin is a virtual currency that was created in 2009 by an unknown computer whizz using the alias Satoshi Nakamoto.
Unlike physical currencies such as pounds, dollars or euros, which come in physical notes and coins, Bitcoin isn’t printed or minted.
Instead, Bitcoin tokens are a digital-only form of payment and are “mined” using high-powered computers.
Its value has fluctuated wildly since its launch.
In other news, personalised smart guns, which can be fired only by verified users, may finally become available to U.S. consumers this year.
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