Bitcoin price even fell 29% on Wednesday after the China Banking Association warned member banks of risks
Bitcoin price even fell 29% on Wednesday after the China Banking Association warned member banks of risks associated with digital currencies. Other digital currencies also suffered a sharp decline.
— TRON AGE (@tron_age) May 20, 2021
Bitcoin’s volatility was fully evident: the decline had decreased to below 10% in early afternoon trading. Bitcoin has lost about 40% of its value since April 13, when it peaked at more than $ 64,606 per coin.
Prior to Wednesday, Tesla’s decision not to accept digital currency as a means of payment for cars, as well as concerns about tighter regulation of digital currencies, were a major contributor to the decline. The price is still 31% up in 2021 and almost 300% up on the previous year.
Here’s a look at Bitcoin and digital currencies in general:
What happened to the award?
On Wednesday, a statement posted on the Chinese Banking Association’s website advised that financial institutions “should absolutely refrain from providing services in digital currencies” because of their volatility.
Virtually every cryptocurrency fell, according to the industry group. According to Coindesk, Bitcoin fell to $ 30,202 before rebounding to $ 38,038, down 12% on the day. Most cryptocurrencies lost between 7% and 22% of their value and shares in Coinbase fell 5.4%.
Bitcoin’s value can change by thousands of dollars in a short period of time. On the last trading day of 2020, Bitcoin closed just under $ 30,000. In mid-April, it flirted with $ 65,000. The price then rebounded with some notable swings before taking a decidedly negative turn last week.
How bitcoin works ?
Bitcoin is a digital currency that is not tied to any bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by adding processing power to verify other users’ transactions. You will receive bitcoins in exchange. The coins can also be bought and sold on exchanges with US dollars and other currencies. Some companies are using Bitcoin as a form of payment, and a number of financial institutions allow it in their clients’ portfolios, but general acceptance is still limited.
Bitcoins are basically lines of computer code that are digitally signed every time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators and criminals.
Bitcoins have to be stored in a digital wallet, either online via an exchange such as Coinbase or offline on a hard drive with special software. According to Coinbase, there are roughly 18.7 million bitcoins in circulation and only 21 million will ever exist. The reason for this is unclear, and where all of the bitcoins are located is unclear.
Does Elon Musk have no role here?
Yeah, and a pretty big one. Musk announced in February that his electric car company Tesla had invested $ 1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as a form of payment. These measures contributed to the rise in the price of Bitcoin, and Musk also promoted the Dogecoin digital currency, which also appreciated in value.
However, Musk quickly reversed course and said last week that Tesla would no longer accept Bitcoin due to the potential environmental damage that Bitcoin mining can cause. The announcement dropped Bitcoin below $ 50,000 and set the tone for the major retreat in most cryptocurrencies.
A number of Bitcoin fans pushed back on Musk’s argument. Billionaire colleague Mark Cuban said mining gold is much more polluting than mining bitcoin.
A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates a lot of CO2 that is similar to a major western city or an entire developing country like Sri Lanka. However, a study by the University of Cambridge last year estimated that an average of 39% of crypto mining was done for evidence of work using renewable energy, mostly hydropower.