June 22, 2021
Bitcoin, the most widely known and traded cryptocurrency, has lost hundreds of billions of dollars in value over the past two months since a regulatory crackdown and Elon Musk tweet caused a massive sell-off of the digital asset.
Following a year of unprecedented growth in the value of Bitcoin, during which the price rose from US$7,175 at the beginning of 2020, to US$63,346 on April 16th, 2021, the price has dropped significantly in recent months, sinking as low as US$29,317.
After deciding to accept Bitcoin as a payment method at Tesla, Musk tweeted on May 12th, 2021 that the payment method is suspended due to the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” This announcement was the beginning of a wave of negative news surrounding cryptocurrency.
In addition to Tesla’s announcement, the Chinese Government intensified calls on authorities to crack down on mining and trading of the cryptocurrency. China stated concerns about illegal securities activities, and the effect that the illegal market could have on the country’s stock, debt, and foreign exchange markets. The People’s Bank of China has made significant moves throughout June, preventing financial institutions from facilitating Bitcoin transactions, and targeting miners throughout the country.
Bad news for the cryptocurrency has not only come from China. The United States announced in May that transfers worth over US$10,000 must be reported to the IRS, and seized most of the ransom paid to hackers in the Colonial pipeline ransomware attack.
As usual, the most important factor on the price of Bitcoin appears to be Elon Musk, who tweeted over the weekend that once the mining is done with 50% clean energy, Tesla will resume accepting the cryptocurrency as a payment method. This announcement caused the price of Bitcoin to rapidly increase. Since then, however, the price has dropped again. Experts rarely agree on the fate of Bitcoin, and the enormous price swings continue to make it a risky asset.
Author: Max Borins