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Panic in cryptocurrency market as Bitcoin sees 40% slump

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THERE is panic among cryptocurrency traders and dealers all over the world, most especially in Nigeria, as Bitcoin, world’s largest cryptocurrency, experienced a 40 per cent crash from its record high levels to $31,000 on Wednesday, a situation last seen in February this year.

A week ago, Bitcoin traded above $55,000. The other two popular cryptocurrencies  -Dogecoin and Ethereum -have also fallen by 45 per cent and 40 per cent respectively.

Experts blame Tesla CEO Elon Musk’s tweets and China’s recent action on the crypto front for the great fall.

“The combined impact of global sell-off, Elon Musk’s crypto reassesment and China’s action is behind the Bitcoin price drop,” said BuyUcoin CEO Shim Thakral

However, he asked to treat China’s event as an isolated event. “Any knee-jerk reaction to China’s action should be avoided. Dow Jones and major indices are down too,” Thakral added.

READ ALSOThe pros, cons of Nigeria’s cryptocurrency ban

On Tuesday, China banned financial institutions, including banks and payment companies, from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.

A tweet by Musk saying Tesla would no longer accept Bitcoins started the sell-off in crypto market. He clarified in another tweet that he remained a strong believer in crypto, but it didn’t seem to impress Bitcoin holders and it has been pratfalls since then.

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Though the fall looks dramatic, it is normal in many volatile markets, including crypto, especially after such a large rally, according to industry experts.

“Such corrections are mainly due to short-term traders taking profits. Long-term value investors might call these lower prices a buying opportunity, as MicroStrategy just did. Technical analysts would call this a test of the support level around $40,000,” said Co-CEO of ZebPay Avinash Shekhar.

The cryptocurrency market was on fire with the price of Bitcoin soaring 10 times, from around $6,000 in April last year to over $60,000 in April this year.

But the current dip provides investors a buying opportunity, said Thakral. However investors should educate themselves before buying into it just like they would do before buying a stock, analysts say

Some industry experts recommend building a long-term portfolio by investing in crypto currencies in a disciplined manner via SIP, like in mutual funds.

“Use strategies like rupee cost averaging and SIPs to more confidently manoeuvre through volatility and take a long-term view,” advised Shekhar.

Vincent Ufuoma is a reporter with The ICIR. He is a lover of God, truth, knowledge and justice.

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