Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The Market Dip: 5 Reasons Why

CryptocurrencyMay 22, 2021 05:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
The Market Dip: 5 Reasons Why

  • The crypto market recorded its biggest dip of the year, sending the prices of Bitcoin to a low last recorded in February
  • The downtrend which started after Tesla (NASDAQ:TSLA) announced that it won’t be accepting Bitcoin as a means of Payment grew worse after China announced that cryptos have been barred
  • The resulting dip set the crypto market back more than 10% of its cumulative value as Bitcoin slumped to near $30,000
  • Amidst the dip, the fear in the crypto market grew to a level last recorded in April 2020

The market dip which started over the weekend cast a lot of doubt over the mind of investors as the price of Bitcoin sank heavily, reaching a low last recorded in February. Fears grew worse as cryptocurrency exchanges in India like WazirX were unable to manage the high trading volumes.

On Wednesday, things grew worse as leading crypto assets including Bitcoin, Ethereum, Binance Coin, and Dogecoin nosedived. Bitcoin neared $30,000, as the overall crypto market lost about 10% of its value. In general, the sea was read for crypto traders and investors. So, what was the cause of the biggest market dip in recent times?

1. Tesla Says No

The market dip began in earnest last week when Tesla’s CEO Elon Musk announced that the electric carmaker won’t be accepting Bitcoin as payment, contradicting their earlier announcement. The company had also earlier bought Bitcoin worth $1.5 billion.

In 2021, Elon Musk and his electric car company have been huge contributors to the growth of Bitcoin and other cryptos, especially Dogecoin. Coming from a leading crypto figure, the news was devastating, sending Bitcoin and Ethereum spiralling downwards.

2. China’s Announcement

One of the major causes of the crypto market dip was fuelled by the People’s Republic of China. On Tuesday, China announced that financial institutions and payment companies have been barred from providing any services related to cryptocurrency transactions.

In 2017, China shut down its local cryptocurrency exchanges at a time when the country accounted for approximately 90% of all Bitcoin transactions. Although not the news that sparked the drop, it added more fuel to an already raging fire.

3. Grayscale Discount Widens Even Further

Grayscale, another major player in the crypto market may have been indirectly involved in the dip. “Grayscale Discount” represents the difference between the price of Bitcoin, as implied by the trading level of Grayscale Bitcoin Trust shares, and the spot-market price.

In addition to the news that sparked the downtrend, the Grayscale Discount fell to a record low of 25%. The widened discount posed and still poses a short-term risk for Bitcoin according to Arcane.

On the Flipside

  • The crypto market is beginning to see the light as major cryptos are beginning to post gains
  • Bitcoin now trades around $40k, while Ethereum trades near $2,7000 and Binance Coin at $373
  • While the market recovery may be slow, the industry will survive the dip, and may have opened a great opportunity for investors to buy assets

4. Fear

Fear and greed; two of the greatest enemies of the market. As the market plunged with the growing uncertainty from China’s announcement, the fear among investors grew unquantifiable. According to the Crypto Fear and Greed Index, on Tuesday, the market sentiment fell to an “extreme fear” level last seen in April 2020.

5. Negative Press

Amidst the market slump, press around cryptocurrencies did little to relieve tensions in the market. With investors and traders already in fear, negative press worsened the situation. More than most markets, the crypto market is hugely affected by the news.

The fear and the resulting doubt caused investors to sell more, causing the crypto market to spiral even lower. In all, Arcane analysts wrote that “an extremely fearful market like this has historically presented solid buying opportunities during bull cycles.”

EMAIL NEWSLETTER

Join to get the flipside of crypto

Upgrade your inbox and get our DailyCoin editors’ picks 1x a week delivered straight to your inbox.

[contact-form-7] You can always unsubscribe with just 1 click.

Continue reading on DailyCoin

The Market Dip: 5 Reasons Why
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
SIKIRU AKANBI
SIKIRU AKANBI May 23, 2021 8:28AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for enlightenment
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email