Why is the cryptocurrency market down today?

CRYPTOCURRENCY markets are freefalling after months of major gains, with some down as much as 50% since highs in April.

Bitcoin has crashed this morning (May 19) after China announced a crackdown on cryptocurrencies.

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Bitcoin and other major cryptocurrencies are down in valueCredit: AFP

The digital currency fell to its lowest level since January after Beijing said it will block crypto exchanges and initial coin offerings.

The price of Bitcoin has dropped 21.92% in the past 24 hours, and 38.78% since this time last week.

The currency is currently valued at $34,214.30, down almost 50% since highs of $64,000 in April.

Other popular cryptocurrencies including Ethereum, Binance, Cardano, Dogecoin and XRP are all also seeing values plummet.

The prices crash has caused chaos with several popular cryptocurrency platforms crashing including Coinbase and Binance.

Binance tweeted to users: “$ETH and ERC20 withdrawals are temporarily disabled due to network congestion. Thank you for your patience and apologies for any inconvenience caused.”

Coinbase said: “We’re seeing some issues on Coinbase and Coinbase Pro and we’re aware some features may not be functioning completely normal. We’re investigating what’s going on right now, and as soon as we know more we’ll let you know.

“We know that customers are experiencing some issues with logging in, seeing their balances, and trading. Our teams are working to resolve this as soon as possible and funds in Coinbase accounts are safe. We’ll circle back as soon as we have an update.”

These crashes are preventing investors for trying to buy currency while prices are low, or selling existing stock to prevent against values plummeting further.

This is the second week of falls for cryptocurrencies. Last week, values dropped by up to 17% after Elon Musk’s shock announcement that Tesla would no longer accept Bitcoin.

It shaved $6.1billion in value from Bitcoin, and sent the crypto market into a downwards spiral.

This extreme volatility and the accompanying sudden market falls are just one of the reasons that investing in any cryptocurrency is a very risky business.

You can be left with less money than you put in, and the markets can shift in the blink of an eye.

There have also been warnings around scams related to cryptocurrencies, with people losing vast sums of money.

You should never invest in something you don’t understand and you should never put in money that you couldn’t afford to lose entirely.

Which cryptocurrency prices are down?

Bitcoin, the most popular cryptocurrency, has plummeted by 21.92% this morning, with the price at the time of writing hovering around the $34,000 mark.

On April 14, Bitcoin hit record highs, surging above $64,000 for the first time ever.

But it has seen volatile crashes over the last weeks, including a huge one-day drop over the weekend of April 17 and 18.

Other cryptocurrencies, such as Ethereum and Dogecoin, also crashed after China announced the ban and warned investors against speculative crypto trading.

Ethereum, the second-largest cryptocurrency, reached a record high of $4,121 on May 10, but has continued to drop in value ever since.

It has fallen by 21.92% in the last 24 hours alone and is currently valued at around $2,403.29.

Dogecoin, a cryptocurrency that initially started as a joke, reached a record high of $0.71 on May 8. The currency is down by 32.67% since this morning with a valuation of $0.329.

Analysts have warned that the Dogecoin “bubble has to burst”.

But Musk has backed the cryptocurrency and on Sunday tweeted his support for it, claiming it is supposedly speeder and more environmentally friendly.

Most other major crypto currencies have also plummeted since this morning. You can check the latest valuations using CoinMarketCap.

What is Bitcoin?

BITCOIN got you baffled? Here’s what you need to know:

Bitcoin is a virtual currency
It’s traded between people without the help of a bank
Every transaction is recorded in a public ledger, or “blockchain”
Bitcoin is created by mining
Mining involves solving difficult maths problems using computer processors
Bitcoin can be traded anonymously, which can make it a popular way of funding illegal activities
The value of Bitcoin fluctuates wildly
Bitcoin is one of many different cryptocurrencies, but by far the most popular

Why are crypto markets down?

Crypto markets surged over the past year as interest increased among individual investors and well-known companies in the financial world.

Well-known mainstream companies such as PayPal, Mastercard and Facebook have backed cryptocurrencies.

Surges also came off the back of Coinbase going public in the US – it is the first cryptocurrency exchange to list its shares on a stock exchange.

It was seen as a major milestone and another sign of cryptocurrency becoming mainstream but its shares are now trading below the initial debut price.

The first signs of trouble came last week, when Elon Musk released a statement saying Tesla would no longer be accepting Bitcoin for purchasing vehicles.

The Tesla CEO has previously caused currencies to spike in value by mentioning them on Twitter or in press statements.

Posting to his personal Twitter account, he wrote: “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”

Within minutes Bitcoin started plummeting. Other cryptocurrencies quickly followed, with several of the mainstream coins seeing a huge drop in value.

Today’s lows have been caused by China announcing a crackdown on the sector.

5 risks of crypto investments

THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.

Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
Marketing materials: Firms may overstate the returns of products or understate the risks involved.

The market drops highlight how volatile cryptocurrencies are.

Coins took another big blow in April when Turkey’s central bank banned the use of cryptocurrencies for purchases.

Investors have also been warned to avoid new cryptocurrencies PooCoin and SafeMoon or risk losing their money.

Both of the coins are new and launched on March 8 – but little is known about them and whether they are legitimate.

The latest bizarre launch, PooCoin, has a logo shaped like the poo emoticon, which may be a joke.

SafeMoon technically isn’t a cryptocurrency but a decentralised finance (DeFi) token, according to its website.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, told The Sun: “The latest coins to be dropped into the crypto wild west slot machine may appear to be a joke, but could be no laughing matter for traders who dabble in products they don’t fully understand with money they can’t afford to lose.”

Other coins which have surged in popularity recently include Dogecoin’s rival Shiba Inu, Bonfire, and Cardano.

But warnings have been issued by experts, stating new coins are barely regulated and their valuation has no “reliable basis”.

Plus, the recent crypto market price plummet sparked by Musk’s announcement has reportedly raised doubts among finance companies about whether these currencies can really make it mainstream.