The cryptocurrency market experienced a bloodbath of sort on Wednesday as prices devastatingly plunged – from Ethereum, Tron, Doge, Litecoin and Ripple to Bitcoin, the most valuable crypto that took the hardest hit.
Bitcoin hit an all-time high of more than $64,000 per unit in mid-April, a 450% rise in just six months but crashed by almost 30% – as low as $32,000.
The crash has rattled investors, traders, and the financial market generally, causing many to panic-sell while many more are holding on and hoping for a miraculous rebound.
What caused the crash?
The logical explanation experts are presenting as the cause of the crash is China’s move to ban cryptocurrency transactions in the country. On Wednesday, the Chinese regulatory body directed banks and payment firms to stop using cryptocurrencies.
But the trouble started last week after Tesla founder, Elon Musk, tweeted that the company has stopped accepting Bitcoins for the purchase of its vehicles. The company expressed concerns about “the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worse emissions of any fuel.”
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment. Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use 1% of Bitcoin’s energy transaction,” Musk had said.
Musk’s tweet spooked the market as some traders and investors started selling off but the Chinese crypto ban is believed to have pulled the trigger as many were driven by fear and uncertainty.
Is it time to sell?
Experts like Changpeng Zhao, the creator of Binance, the largest cryptocurrency exchange in the world, think it’s time to “HODL” (hold on for your dear life), a term used in the cryptocurrency world, which simply means ‘don’t sell’.
In a series of tweets on Wednesday, Zhao advised people to stay the course. “If you panic sell, you won’t be crypto rich NFA” (meaning Not Financial Advice), he wrote.
If you panic sell, you won't be crypto rich.
— CZ 🔶 Binance (@cz_binance) May 19, 2021
Elon Musk’s tweets following the slump also suggested that Tesla will not be selling its bitcoin holdings. “Tesla has Diamond hands” and “Credit to our master of coin”, he said.
Credit to our Master of Coin
— Elon Musk (@elonmusk) May 19, 2021
Also reacting to the crash, Charles Hoskinson, the founder of Cardano, a public blockchain platform, posted on Twitter, “One of those days. For all the new kids in crypto, welcome, these days are surprisingly common”, suggesting that price crash is normal in the cryptocurrency world even though the current slump is the worse for the world’s No. 1 crypto.
One of those days. For all the new kids in crypto, welcome, these days are surprisingly common pic.twitter.com/5bcuptxOoy
— Charles Hoskinson (@IOHK_Charles) May 19, 2021