Bitcoin takes deep plunge, wipes out over $260 bn of cryptocurrency market

With bitcoin down nearly 10% in the last 24 hours at $49,281.40, and Ethereum falling to $2,202.05, a large gaping hole has been left in the cryptocurrency market.

Moreover, XRP which is the fifth-biggest cryptocurrency fell over 22%. As such, a whopping $260 billion of value has been wiped out from the cryptocurrency market. Analysts are unclear as to what suddenly triggered this massive fallout.

Vijay Ayyar, head of business development at crypto exchange Luno, told CNBC that the market has run up quite a bit overall, and its most likely cooling off before the next leg up. “There has been a wider stock market dip, which might be affecting all risk-on assets,” he explained.

Bitcoin had been sailing through since last quarter of 2020 catching investments of billionaire investors, such as Elon Musk. Companies like Square and Tesla have bought billions of dollars worth of bitcoin. And reports have highlighted that banks are also trying to allow their clients to get involved in the cryptocurrency market; most particularly, Morgan Stanley, in March, said it was launching access to three funds that enable ownership of bitcoin.

Coindesk quoted Pankaj Balani, CEO of crypto derivatives venue Delta Exchange, that when looking at a larger trading chart time frame the outlook is starting to look bearish for bitcoin. “BTC has slipped below the 50-day moving average support that it held sacrosanct through this rally, and looks like there is more downside here,” he said. “We might see a sharp bounce in bitcoin, but until it moves above $60,000 the possibility of a bull trap cannot be eliminated.”

Analysts in Europe, as per the Independent, that the price crash coincided with the largest daily drop in bitcoin’s hash rate in nearly four years, which could be attributed to power outages in Chinese region of Xinjiang. It says that hash rate signifies how many blocks of new bitcoins are being mined at any one time, with some claiming there is a correlation between the network’s hash rate and bitcoin’s price.

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The US Treasury Secretary Janet Yellen, in February, had described bitcoin as a “highly speculative asset” and said she was worried about potential losses for some investors. And Jesse Powell, CEO of a major crypto exchange – Kraken, warned governments could clamp down on the use of bitcoin and other cryptocurrencies.