The market decline that began over the weekend caused investors to have many second thoughts as the price of Bitcoin dropped sharply and hit a low last seen in February.
That is why there are articles online that feature the seven questions to ask the trading platform of your choice. Concerns worsened as Indian bitcoin exchanges like WazirX struggled to handle the large trade volumes.
Things got worse on Wednesday as popular cryptocurrencies, including Bitcoin, Ethereum, Binance Coin, and Dogecoin, plunged. As the global cryptocurrency market lost around 10% of its value, Bitcoin came close to $30,000. Cryptocurrency traders and investors generally read the sea. What led to the most significant market decline in recent memory?
Leading causes of the market dip
Whales Movement
A person or organization with a sizable number of cryptocurrencies is referred to as a “whale” in the cryptocurrency community. A whale can change the asset’s value with just one movement.
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How do whales affect the decline in the price of cryptocurrencies?
An instance of this is the transaction that took place on September 8, 2021, at 10:56 AM GMT+8, in which 1,000 BTC, or almost USD 47 million, were transferred from the Coin base to an unidentified wallet. Retail cryptocurrency investors may feel forced to sell because they are concerned about the impact of such a large transfer on the market. Imagine that the whale dropped the price by selling all 1,000 BTC for a different coin. Imagine that the whale sold all 1,000 BTC for a different coin, which would have increased the value of that coin while decreasing the value of Bitcoin.
Tesla doesn’t permit
When Tesla’s CEO Elon Musk said last week that the electric carmaker wouldn’t take Bitcoin as payment, contradicting their earlier announcement, the market correction started in earnest. Additionally, the business had already spent $1.5 billion on Bitcoin. Elon Musk and his electric vehicle business significantly aided the development of Bitcoin and other cryptocurrencies, particularly Dogecoin, in 2021. The news, which came from a prominent crypto personality, was devastating and sent Bitcoin and Ethereum plummeting.
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Fear, uncertainty, doubt
The acronym FUD stands for fear, uncertainty, and doubt. It is a misinformation tactic used by marketing and sales professionals to sway audiences’ perceptions by disseminating unfavorable, suspect, or misleading information that inspires apprehension. Whether the news is positive or negative, it can significantly impact how prices move. Elon Musk, for instance, tweeted about having DogeCoin. People responded to that tweet by purchasing the coin from FOMO, raising the price.
However, the long-running XRP lawsuit has caused the coin to plunge into a price dungeon and is still slowly climbing out of it.
The Grayscale Discount Grows Even Wider
Another significant player in the cryptocurrency business, Grayscale, might have indirectly contributed to the decline. The gap between the amount of Bitcoin as indicated by the trading level of Grayscale Bitcoin Trust shares and the spot-market price is known as the “Grayscale Discount.” The Grayscale Discount also hit a record low of 25% in addition to the news that started the downtrend. According to Arcane, there is a short-term risk for Bitcoin due to the widened discount.
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Announcement by China
The People’s Republic of China was one of the main contributors to the decline in the cryptocurrency industry. China stated on Tuesday that all payment and financial services related to cryptocurrency transactions are no longer available. When China accounted for around 90% of all Bitcoin transactions, the country closed down its domestic cryptocurrency exchanges in 2017. Even while it wasn’t the news that caused the dip, it poured gasoline on a fire already blazing.
Can the dip in cryptocurrency be recovered?
Crypto will likely bounce back from a dip if it has survived multiple spectacular events like bitcoin. Many investors will purchase even more cryptocurrency as its price falls. The average cost they acquired that coin would be lower if they did this.
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Conclusion
Numerous causes could be to blame for the market decline. But to stop yourself from making poor choices, you must learn to control your emotions. Corrections are inevitable and beneficial to the market. Don’t forget to design your trading strategy and conduct your research. Most people who try us succeed in making respectable profits. Registering with us can also jumpstart your path to financial independence. Keep in mind that investing has risk, as does all trading.