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$200 Billion Wiped Off Cryptocurrency Market As Bitcoin Slumps 20 Percent

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$200 Billion Wiped Off Cryptocurrency Market As Bitcoin Slumps 20 Percent

Around $200 billion (£148 billion) was struck off the world's cryptocurrency market after the value of bitcoin fell by more than 20 percent in a matter of days, causing widespread concern within the financial market.

Bitcoin prices had been on the up and up, moving up to a record high of $42,000 (£30,991) on Friday. That meant that the entire global coin - not just bitcoin - market was worth $1.07 trillion (£790 billion).

However, as of Monday evening, that value had plummeted back down to $31,000 (£23,000) meaning that the global crypto-coin market was back down to $880 billion (£649 billion).

Not everyone is so upset about this. Obviously, those with loads of money invested in bitcoin could be happier, but quite a few financial experts have referred to this slump as a 'healthy correction' after the cryptocurrency had reached up to some seriously unsustainable levels.

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Bitcoin passed $40,000 earlier this week. Credit: PA
Bitcoin passed $40,000 earlier this week. Credit: PA

Whilst crypto experts will call it an example of traditional finance fearing the unknown, the Bank of America had warned last week that the stratospheric rise of bitcoin could be 'the mother of all bubbles', drawing comparison with the tech boom of the 1990s.

Chief market analyst at AvaTrade, Naeem Aslam, told CNN that the drop was a welcome one, and 'due a long time ago'.

James Putra, the vice president of product strategy at TradeStation Crypto, continued: "It's scary when the price of bitcoin just goes straight up. This pullback was needed."

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At the beginning of the year, the world's most popular cryptocurrency was in the doldrums, with prices at a low of $3,850 (£2841) last March, before the Covid-19 pandemic had a huge impact on the global financial picture.

There were fears of rising inflation, and the possibility that the US dollar could be debased, meaning that investors flocked over to bitcoin in the search for a crash-proof investment.

Before that economic drop, JP Morgan predicted that bitcoin could rise to as high as $146,000 (£108,000) and even rival gold if seen as a safe option.

Financial experts have said that the slump is 'healthy'. Credit: PA
Financial experts have said that the slump is 'healthy'. Credit: PA
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It grew to $20,000 (£14,758) by mid-December, and passed $30,000 (£22,137) in January, before hitting that record high and slumping backwards once again.

That said, many experts are still confident in bitcoin, as it remains up by 10 percent for the year so far, even after this crash.

Bitcoin was invented in 2009 by an anonymous person or persons acting under the pseudonym Satoshi Nakamoto.

According to research performed by the University of Cambridge, there were between 2.9 and 5.8 million unique users with a cryptocurrency wallet in 2017, with the majority of those using bitcoin.

Featured Image Credit: PA

Topics: World News, Money, Finance

Tom Wood
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