Bitcoin (BTC) has already experienced two strong downturns this week. On Monday, the asset experienced its biggest daily dollar drop in history, but the cryptocurrency quickly recovered. However, it was on Tuesday (23) that the devaluation really materialized. The price of the crypto has lost $ 10,000 in value in the past 24 hours, resulting in more than $ 100 billion in losses to its market value.
Biggest daily drop in history
Yesterday, bitcoin suffered a lightning devaluation. From $ 58,332 that the asset was worth on Sunday, the highest price in its history, it dropped to $ 47,780 on Monday morning. In a matter of less than 24 hours, the cryptocurrency lost more than $ 10,000 in value, setting the biggest daily dollar drop in history, according to the price index CoinDesk.
However, Monday’s losses were quickly recovered. By the end of the afternoon of the same day, bitcoin was back to the $ 55,000 level. But the strength of the cryptocurrency remains unstable and yesterday’s devaluation only served to materialize the fall that the asset suffers today.
Bitcoin falls again on Tuesday
Today bitcoin operates in a free fall. This morning, the crypto reached a minimum price of $ 44,964. A devaluation almost as big as yesterday’s record. However, the cryptocurrency has yet to show any concrete signs of recovery to resume the $ 50,000 level. At the time of this publication, the digital currency is fluctuating in the $ 48,000 range.
This is the lowest bitcoin price since February 10. For the past two months, the cryptocurrency has been breaking records in the face of high demand from institutional investors in conjunction with the current scarcity of assets in the market. Thus, this is the first significant devaluation that the currency has suffered in weeks of successive highs.
One of the main factors for this continued appreciation was Tesla’s $ 1.5 billion purchase of bitcoin, announced in the second week of February. After that, the enterprise software company MicroStrategy also announced that it will buy $ 600 million in digital currency.
Bitcoin market value falls by $ 100 billion
With the price devaluation, bitcoin’s total capitalization has also suffered a severe retraction. Having exceeded $ 1 trillion in market value for the first time in history last Friday, today the cryptocurrency has lost over $ 100 billion in value, according to data from CoinMarketCap.
During yesterday afternoon, bitcoin was capitalizing more than $ 1 trillion, and then fell to a minimum market value of $ 853 billion on Tuesday. Since there has been a slight recovery in digital assets since then, the cryptocurrency is worth about $ 900 billion at the time of this publication.
The current factors for devaluation
The cryptocurrency market, and especially bitcoin, determines its prices based on two simple logics: that of supply and demand, and the momentary speculative euphoria. The first factor is the most obvious. The second is completely unpredictable.
In the case of bitcoin, there is a current reduction in its offer due to the cut in the mining rate of the digital currency. It is a natural system of the cryptocurrency program, called halving, which is activated every four years and consequently reduces the amount of BTC on the market. This has allied with high purchase demand and has raised the price of digital assets to historic levels since December 2020.
That said, after the record set at the end of Sunday, it is historically natural for mass sales of investors to seek immediate profit. Consequently, more currency comes back into circulation and its price drops.
Elon Musk and Janet Yellen’s speeches affect the market
The second factor is market euphoria, speculation generated by news and events that happen worldwide. This huge drop was specifically driven by two statements by leading figures in the cryptocurrency industry.
The first is Elon Musk, owner of Tesla, which since Friday has been publishing statements not favorable to cryptocurrency. On Friday (19) he said that “bitcoin is almost the same nonsense as a fiat currency”. While over the weekend he responded to a Twitter follower stating that the price of the digital asset “really is high”.
The second news that impacted the price of bitcoin was the speech of Janet Yellen this Monday. “I don’t think bitcoin … is widely used as a transaction mechanism,” the US Treasury Secretary told CNBC. “As it is used, I fear that it is usually for illicit financing. It is an extremely inefficient way of conducting transactions, and the amount of energy that is consumed in processing these movements is impressive, ”he said.