After the price crash, what do experts say about Luna, Bitcoin and Ethereum?
The sharp fall of cryptocurrencies over the last two weeks has become an object lesson in the new volatility of digital assets. Bitcoin plunged by more than 7% on Monday alone, prompting a flurry of speculation about this week’s dramatic price moves. But experts say that the price drop won’t have much effect on where the currencies will go next – and that investors should still hold onto their coins, regardless of how low they might go. The price of bitcoin has plummeted again this week, falling to about $6,000 per coin on Wednesday. Bitcoin dropped below $30,000 for the first time since last Christmas as its value fell by over 10% in a single day. Now bitcoin is trading at around $5,700 – a drop of more than 22% in two weeks. And it’s not just bitcoin: other cryptocurrencies have seen similar drops, with Ethereum and Ripple dropping by 24% and 14%, respectively.
Why is cryptocurrency struggling?
There isn’t a simple explanation for the recent price drops, but experts suspect that the fall is mostly due to market manipulation. One of the reasons cryptocurrencies like bitcoin have become so popular is because they’re supposed to be decentralized – that means that no single company or government can manipulate the system. But there are still cases of market manipulation involving cryptocurrencies – because all of the trading is done online, it’s easy for people with a lot of power to influence prices. In December, bitcoin prices fell when major South Korean cryptocurrency exchange Coinrail was hacked and more than $40 million in coins were stolen. Coinrail is a relatively small exchange – when compared to the likes of Coinbase or Bitstamp, which are US-based and are big enough to cause much bigger price swings.
Will crypto go back up?
There’s no guarantee that bitcoin will go back up in price, but experts say that the cryptocurrency has a long history of increasing in value. The chart below shows daily bitcoin trading volumes across exchanges by year. The sharp drop in the middle of December was due to the Coinrail hack – but this still suggests that prices haven’t seen the last of their volatility.
What happened to Terra (Luna)?
Terra, a new coin that’s effectively a fork of litecoin, saw its value drop by 99% over the weekend. The currency failed to sell enough coins at its ICO – a process that allowed it to raise $39 million in cryptocurrency. That’s around 21% of the money raised in ICOs this year. The team behind Terra said they were working on securing more funding, but some investors were skeptical. That led to a massive sell-off that caused the coin’s value to drop from around $0.07 to less than $0.01 in just a few days.
What happened to Ethereum?
The value of Ethereum has also been fluctuating wildly in recent weeks. At the beginning of the year, one ether was worth around $90. It peaked at $1,400 in mid-December. But after a few days of sharp drops, it’s now trading at around $400 – a drop of over 40% in two weeks.
#Bitcoin August closing price $47,156 .. like clockwork pic.twitter.com/3hkp71FTXo
— PlanB (@100trillionUSD) September 1, 2021
Why is this happening? (and what will happen next?)
It’s been a great year for cryptocurrency investors, with the aggregate value of all currencies increasing by more than 3,300%,” says Jeremy Epstein, CEO of Never Stop Marketing. But it’s very risky to think this is just going to continue – there are a number of factors that could cause the price of Ethereum and other cryptocurrencies to start plunging again.” First, these markets move fast,” he says. “The price rises in recent months have been dramatic and quick, but they’re not necessarily sustainable. Second, this is primarily a trader’s market right now. Very few retailers or other mainstream users are using crypto for anything other than speculation on secondary markets.
