Jakarta, CNBC Indonesia – The high volatility of crypto asset transactions has recently become a source of uncertainty for investors investing in this instrument. The climax was, on Wednesday, the value of crypto asset market capitalization had collapsed from US $ 2.5 trillion to US $ 1 trillion.
CNN Business Senior Editor, Allison Morrow, in his report said, because of the high volatility of this transaction, he compared the experience of investing in crypto to buying a ticket to a crypto circus.
“Last week’s volatility was enough to make some crypto followers wonder if they had been tricked,” Allison said, quoted Sunday (23/5/2021).
Bitcoin for example, which accounts for more than 40% of the global crypto market, fell 30% to $ 30,000 on Wednesday hitting its lowest point since January. However, as of Friday, bitcoin has recovered a bit, to around $ 37,000. In fact, a month earlier, bitcoin had reached its highest level above US $ 64,000.
He suspects that the aggressive volatility of the cryptocurrency market due to the explosive growth of digital assets in the past year has attracted hordes of amateur and professional investors looking for quick profits.
“A lot of them go up and out, or panic selling when things turn bad, exacerbating profits or losses,” he said.
In addition, this week there are some negative sentiments that have put pressure on crypto assets, among others, warnings from governments such as in China and the US about the high risk of investing in crypto assets and tweets from influential market movers such as Elon Musk, CEO of Tesla, adding more ‘fuel’ to an already jittery market.
In addition, Elon Musk also withdrew from Tesla’s commitment to accept bitcoin as payment, citing concerns over the cryptocurrency’s massive carbon footprint. This added to investor anxiety last weekend with his seemingly contradictory tweets about bitcoin that left investors scratching their heads.
Then major devastation occurred on Wednesday, after Chinese officials signaled a crackdown on crypto use in the country. The central bank issued a warning to Chinese financial institutions and businesses not to accept digital currency as payment or offer services using it.
The threat of increased regulation sparked panic, and Bitcoin fell before rebounding slightly and leveling up. Other cryptocurrencies also declined: Ethereum fell by more than 40%, while Dogecoin and Binance lost about 30%.
It’s not just China, Federal Reserve Chair Jerome Powell warned about the potential risk cryptocurrency poses to the financial system. Powell also said the central bank will publish a paper this summer exploring the implications of the US government developing its own digital currency.
“A potential central bank digital currency could serve as a complement to, and not a substitute for, current private sector cash and digital forms of the dollar, such as deposits in commercial banks,” said Powell.
What is the Future of Crypto?
Vitalik Buterin, the creator of the Ethereum digital coin, had to give up most of his personal wealth that was lost due to the crypto crash, including Ethereum.
It says to CNN Business in an exclusive interview on Tuesday (18/5/2021) morning that he was convinced cryptocurrency is going bubble. He stressed, however, that it is very difficult to predict when bubble in crypto will appear.
“It could be over, but it could not be over, or the worst could be months from now.” said Buterin to CNN Business.
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