Recently, the China Banking Association issued a warning to its member banks about the shaky digital currency space. That announcement caused Bitcoin to dropped by 29% on Wednesday, as well as other cryptocurrencies.
On April 13, Bitcoin rose to $64,606 per coin, but this week’s drop amounted to a 40% drop from that high. The crash is coming at a time when Wall Street and main street financial firms hopped on the bitcoin bandwagon as the prices soared.
Goldman Sachs relaunched its bitcoin trading desk earlier this year to offer investment service to its high-net-worth clients who want to take advantage of rising bitcoin prices without owning it.
Fidelity is seeking regulatory approval to enable it to launch a bitcoin fund targeting institutional and wealthier individual clients. Likewise, PayPal launched a campaign targeting the first 48,000 clients who purchase bitcoin via its app.
However, the cryptocurrency market has plunged where bitcoin’s value dropped to $30,000 against its April high of $63,000. According to Coinmarketcap.com, bitcoin’s total value has dropped by almost 450 billion. Similarly, other digital currencies like ethereum have also experienced a slump.
What could be happening to the cryptocurrency market?
One of the major causes of this drop was the announcement by Tesla that it won’t be accepting digital currency payments for its cars. Also, the tighter regulation of this market has caused it to decline further.
The Chinese Banking Association warned its members not to accept digital currencies as payment for their services because it’s becoming volatile. Evidently, all cryptocurrencies lost between 7% and 225 after that Wednesday announcement.
Further, Elon Musk has contributed to this volatility. In February, the Tesla owner announced that the firm had invested significantly in Bitcoin. In March, the electric car company started accepting bitcoin as payment, causing a run-up in digital currency prices. He even promoted Dogecoin, prompting its price to spike.
However, last week Musk changed tune and said his company will stop accepting such payments due to the potential environmental effects of mining bitcoin.
That statement caused bitcoin to drop to $50,000, and now the recent Chinese Banking Association remarks made it drop further.
It’s hoped that Bitcoin proponents such as Twitter CEO, Jack Dorsey CEO of Square, BNY Mellon, and MasterCard, among others, will support these cryptocurrencies. However, the financial service companies getting in should outdo those staying away to reduce this volatility.
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