Business

Cryptocurrency market crash; Why is crypto down today?

Published

3 years ago

September 20, 2021

After a year of gains and record highs, crypto currencies are enduring a turbulent time with unpredictable price changes.

Cryptocurrency market is down 7.95% on the last 24 hours (9.15am, Monday September).

Bitcoin and other leading crypto coins experienced a significant drop in share price after investors began dumping mining equipment as China announced fresh regulations.

Bitcoin (BTC) was down -6.73% at 9.15am on 20 September, followed by Ethereum (ETH) -8.93%, Cardano (ADA) -10.36%, Binance Coin (BNB) -6.74%, Tether (USDT) +0.44%, XRP (XRP) -11.08%, Solana -13.64%, Polkadot (DOT) -9.49%, Dogecoin (DOGE) -8.95%, Avalanche (AVAX) -14.05%, Uniswap (UNI) -8.43%, Chainlink (LINK) -12.08%, Litecoin -9.07%, Bitcoin Cash (BCH) -10.61%.

It follows recent crashes brought on by Tesla making a u-turn on accepting Bitcoin as payment for its products and China clamping down on initial coin offerings, block exchanges and warned against speculative trading.

A further blow was dealt when China ordered Bitcoin mining in its Sichuan province to shut down completely and furthermore told banks to stop supporting crypto transactions, in a latest wave of restrictions on cryptos.

This is what’s going on in the world of cryptocurrencies…

Why is the crypto market down?
China’s crackdown on cryptos comes days after Musk’s shock announcement.

Musk’s decision signifies a sharp u-turn for Tesla who only started accepting Bitcoin as payment for its services in February 2021.

It came after the electric car company bought $1.5b (£1.06b) of Bitcoin shares, which in turn sent the market price of both the crypto and Tesla soaring.

Yet the impact on the environment of Bitcoin mining – a complicated process of minting new digital tokens – has seen Tesla withdraw this option for customers.

The billionaire entrepreneur said: “We are concerned about rapidly increasing use of fossil fuel for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”

Musk reaffirmed his belief that cryptocurrency has a “promising future” but that it “cannot come at great cost to the environment”, in his Twitter post.

Musk has been a long-time advocate of cryptocurrencies and the Tesla decision was felt across the market, with other digital tokens going down in price.

What is the price of Bitcoin and Ethereum?
The price of Bitcoin was £32,837.73 after the latest drop in prices (20 September), according to Coinbase.

In the last 24 hours, Ethereum had dropped to a value of £2,284.59.

Cryptocurrencies are seen as an alternative to traditional banking methods, cheaper to move money around due to not being regulated by the government or its banks.

The decision by Tesla, and announced by Musk, was seen by some as a slight on the credibility of cryptos to become a viable method of payment against physical currencies.

Experts have characterized Evergrande’s struggles as a major test for Beijing, with some worrying about whether the company risks creating China’s Lehman Brothers moment. While other analysts have said it’s far from certain that Evergrande’s crisis will become a similarly far-reaching event, the crisis has sent shockwaves across the world.
The property firm, which is struggling to manage its $300 billion mountain of debt, was supposed to pay the interest on some of its bank loans Monday, according to Bloomberg. Evergrande did not respond to a request from CNN Business for comment about those payments.?

Interest on two of its bonds worth more than $100 million is also due later this week, according to Refinitiv. Shares of Evergrande fell 5.7% in Hong Kong on Tuesday, extending Monday’s losses.
Even though the company primarily serves mainland China, investors around the world are worried. The massive amount of money borrowed by Chinese companies has long been considered a looming threat to market stability. Now investors fear the exposure that banks might have to Evergrande and companies like it..

US banks fell on Monday, with Goldman Sach (GS) and JPMorgan (JPM) among the Dow’s worst performers.
The issue had already weighed on Hong Kong markets earlier in the day, as Chinese banks, insurers and other real estate companies were slammed.
5 things to know about Evergrande, the Chinese business empire on the brink
5 things to know about Evergrande, the Chinese business empire on the brink
Edward Moya, senior market analyst of the Americas at Oanda, said on Monday that bitcoin was no different from other assets..

“The fallout from the Evergrande is putting a tremendous dent in risk appetite that is sending everything lower,” he wrote in a note to clients.
Moya noted that cryptocurrencies had performed well this year, “despite all the volatility.”
“So it should not surprise Wall Street they are the first asset sold in the beginning of China-driven market selloff,” as investors aim to cash in, he added..

Others have taken the occasion to double down. Nayib Bukele, the president of El Salvador who is known for his bullish stance on bitcoin, tweeted Monday that “we just bought the dip.”
The country purchased 150 bitcoins, and now holds 700 coins, he added.
Earlier this month, Bukele announced that El Salvador had become the world’s first country to adopt the digital currency as legal tender.