Source: China News NetworkChina New Finance and Economics on June 22nd(Gong Hongyu) "People in the currency circle are hungry nine times in three days." This joke is being applied in the virtual currency investment circle
Source: China News Network
China New Finance and Economics on June 22nd(Gong Hongyu) "People in the currency circle are hungry nine times in three days." This joke is being applied in the virtual currency investment circle.
Recently, Bitcoin, the world's largest virtual currency, plummeted all the way to below the $18000 mark on June 19th and reached its lowest level in two years. Although the currency value slightly rebounded to around $21000 on the 21st, there is still a significant gap from the peak of $69000 in November last year.
Some netizens said that money evaporates faster than water, and virtual currency is a "puzzle game" of beating drums and passing flowers. Is that really the case?
The price trend of Bitcoin in the past month. Data source: Investing.com
580 billion RMB evaporated from the wealth of the 'richest Chinese'
If we sell a Bitcoin purchased at the highest value of $69000 now, we will lose $49000 (approximately RMB 320000), which is enough to buy a Tesla Model 3. "Someone exclaimed.
The historical loss rate has led to heavy losses for players, with some jokingly claiming that Bitcoin billionaires are "returning to poverty overnight". According to the Bloomberg Billionaire Index, seven billionaires related to cryptocurrencies have lost a total of $114 billion since the "high light moment" of Bitcoin prices in November last year.
The most obvious example of "slimming down" is Zhao Changpeng, the founder of Binance, the world's largest cryptocurrency exchange, who topped the list of Chinese richest with nearly $96 billion at the end of last year. With the collapse of Bitcoin, as of June 15th, Zhao Changpeng's wealth has plummeted by 89.3% this year, evaporating $85.6 billion (approximately 580 billion RMB).
As a well-known holder of Bitcoin, Tesla has also suffered significant losses in this market trend. According to data, Tesla currently holds 43200 Bitcoins worth $968 million, with a loss of approximately $530 million from investing in Bitcoins.
Moreover, El Salvador, a country that uses Bitcoin as its legal tender, faces significant financial risks due to the shrinking value of Bitcoin. The Salvadoran government has successively purchased 2301 Bitcoins.
According to data from nayibtracker.com, the total cost of purchasing coins in El Salvador is $105 million, with an average purchase price of nearly $46000 per coin. According to the latest coin price ($20453.57), El Salvador's Bitcoin holdings have lost 55.45%.
Who made cryptocurrencies fall off the altar?
In fact, it is not only Bitcoin that has experienced a catastrophic decline, but various cryptocurrencies are not optimistic. For example, the second largest cryptocurrency, Ethereum, fell below $1000 on June 18th, returning to the era of "triple digits", reaching a minimum of $880. The Luna coin, which had a market value of up to $41 billion, had also experienced a diving depreciation before, with its price dropping from nearly $90 to less than $0.0001.
Multiple analyses have pointed out that high inflation and interest rate hikes by multiple central banks have sparked investors' concerns about economic recession. The demand for safe haven in financial markets has increased, and a large amount of capital has flowed out of cryptocurrency markets such as Bitcoin, leading to a significant drop in prices in the near future.
More worrisome is the recent inability of some investors to withdraw funds from some cryptocurrency exchanges under the shadow of capital outflows, leading to a more intense panic over the liquidity of virtual currencies.
For example, Binance suspended Bitcoin withdrawals for several hours last week, claiming that some transactions were stalled; Celsius, a cryptocurrency lending giant with 1.7 million users, also announced that due to "extreme market conditions", the company will suspend all withdrawals, swaps, and transfers between accounts.
So, is Bitcoin as low as freezing point a bottoming opportunity? Sam Callahan, an analyst at the Bitcoin Exchange Swan, believes that based on previous bear market experiences, Bitcoin may fall by more than 80% from its historical high. This means Bitcoin will drop to $13800.
In addition, according to historical experience, a large amount of funds often enter the cryptocurrency market after a sharp decline in Bitcoin to try to take a bottom, but now the flow of funds is the opposite, and these funds are also inclined to continue to withdraw from the cryptocurrency market.
However, there are also some veteran players who hope the market can return to stability, still waving their flags and shouting. For example, on the 19th, Musk issued an article to support his beloved dog coin, and the price of dog coin also rose by 8% in response. However, after counting the rebound, the cumulative decline of Gougou Coin from the beginning of the year to the present is still over 60%.
Jackson Palmer, co founder of Dog Coin, recently stated in an interview that the bottom of the cryptocurrency 'house of cards' has' begun to collapse'.
Data chart: USD. Photographed by Gong Hongyu of Zhongxin Finance and Economics
Bitcoin is a game of 'fighting fools'?
The sudden drop in Bitcoin this round has once again raised doubts about its underlying logic.
Buffett, the "number one opponent" of cryptocurrencies, once stated that Bitcoin is not a productive asset and will not produce anything tangible. The crypto digital asset market that exists in the virtual world is often weak in the face of crises, and any negative event will be amplified.
Buffett also bluntly stated that even if the total price of all Bitcoin in the world was only $25, he would not buy it.
On June 14, when Microsoft founder Bill Gates attended the event, he said that the cryptocurrency project was a hoax based on the "Greater fool theory". As long as we find a more foolish person to take over the investors' assets, even if the assets are worthless garbage, investors can still make money.
Undoubtedly, most Bitcoin players enter with the idea of making money, as there are too many myths about "wealth creation" in this field. However, the sudden drop in Bitcoin once again highlights the potential huge risks in the virtual world.
The Chinese government explicitly prohibits cryptocurrency trading activities led by Bitcoin. In July 2021, the central bank issued a notice stating that consumers should enhance their risk awareness, not participate in virtual currency trading and speculation activities, not blindly follow virtual currency related speculative behavior, and be cautious of personal property and rights damage.
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