Over the weekend, the cryptocurrency market took another tumble. Bitcoin fell more than 10% and tested the $32k level before bouncing. Also, Ethereum and other cryptocurrencies have lost more, with most of the coins down over 50% in April.
It all started with Elon Musk, the CEO of Tesla, tweeting at the start of the trading month that the company will not accept Bitcoin as payment for the purchasing of its electric vehicles. As such, Bitcoin collapsed, and other digital assets followed the same path.
Is It the First Time When Bitcoin Drops That Much?
A quick check at the Bitcoin’s price history reveals that such a drop is actually part of the way the asset moves. Throughout history, Bitcoin lost over 80% of its value three times – in 2013, 2016, and 2018.
Some other times, it frequently lost more than 40% of its value. Yet, Bitcoin did found its way out of it, although the volatility is not for the everyone.
If we look at what happened in May so far, Bitcoin’s price corrected from over $60k close to $30k. That is a drop of 50% in less than a month.
This is a problem not only for the crypto assets but for traditional financial assets too. One must remember how Bitcoin’s adoption has increased among institutional investors lately, and such a drop may end up posing a systemic risk to markets.
It did not, so far, as the equity markets remain stable. However, the declines in some crypto assets are so steep that institutional investors that adopted crypto have some explaining to do to their clients.
All in all, the move lower in Bitcoin is not unusual if we check historical prices. The only thing that is different at this point is that the move lower does not affect only retail traders anymore but also institutional investors. If the bearish market continues, the risk of seeing some spillovers in the traditional markets increases exponentially.
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