Bitcoin and other digital currencies tanked on Monday, wiping out about $170 billion from the whole crypto-currency market. The largest cryptocurrency, Bitcoin, fell by over 11 percent from a day earlier to $35,828.06. The sell-off in cryptocurrencies comes after a huge rally and perhaps suggests some profit-taking by buyers.
Bitcoin trading volumes have surpassed $11 billion on the eight main exchanges monitored on the CoinDesk 20 tracker, a new all-time high from the previous peak established during the bull market of 2017.
According to Yahoo, on-chain data mining company Glassnode noted that in a single day, more than 1.3 million Bitcoin addresses were involved at last week’s peak.
“This continued spike indicates that bitcoin has an impressive level of new adoption and activity, and suggests that the number of network market participants may be higher than ever before,” Glassnode said.
Despite the Recent Downturn, Optimism for Bitcoin Remains
The latest Bitcoin-related patterns are definitely mixed. A crazy streak of late has seen the blockchain and a pull-back is not alarming to everyone in the business. Despite the collapse, it can be remembered that Bitcoin manages to transact with tremendous gains year-over-year and month-over-month.
In the past year, Bitcoin has more than quadrupled, evoking memories of the 2017 mania that first rendered a household name for cryptocurrencies before values plummeted almost as rapidly. On Jan. 8, with retail traders and Wall Street buyers clamoring for a slice of the action, stocks nearly hit $42,000.
The rally this period varies from previous boom-bust periods because the currency has stabilized with the entrance of foreign investors and is gradually viewed as a credible buffer against dollar weakness and inflation risk, true believers in Bitcoin say.
Others are concerned that the boom is untied by merit and fueled by large swathes of fiscal and monetary stimulus, with Bitcoin unable to ever function as a credible substitute currency.
Why the Bitcoin Mania?
With many people trying to get wealthy on Cryptocurrencies, the currency is catching regulators’ interest. The U.K.’s financial watchdog released a stern alert on Monday for buyers hoping to gain from crypto: be prepared to risk anything.
Demand from institutional buyers, many of whom consider bitcoin as a buffer for inflation. As only 21 million bitcoins can ever be created under the initial programming of the network, cryptocurrency is seen as an inflation buffer; there is also a contrast with central banks such as the Federal Reserve which, based on a committee vote, will try to print additional capital.
Via futures contracts on the Chicago-based CME platform, such as Tudor Investment and Guggenheim Partners, major fund managers have recorded bitcoin trades or wagered on prices.
And old-line Wall Street businesses like Morgan Stanley have weighed in with bullish pronouncements. Analysts at JPMorgan Chase, the biggest U.S. firm, recently forecast a price of $146,000 over the long term.
In the foreign exchange markets, the collapse of the US dollar. In 2020 and again in 2021, the U.S. Dollar Index, a currency worth measurement against other world currencies such as the euro and Japanese yen, dropped by 6.8 per cent. For bitcoin, as the price of the blockchain is mostly denominated in U.S. dollars, that is important.