The crypto market has plunged with major coins falling in price over the past 24 hours.
The price of Bitcoin, the largest cryptocurrency on the market, has dropped 10% and dropped below $60,000.
Cryptocurrencies are down by about the same amount at press time over the past day and down for the week.
Cryptocurrencies are highly volatile, meaning their value often fluctuates without warning, as today’s drop shows.
The extreme volatility and accompanying market drop are just one of the reasons why investing in cryptocurrencies is such a risky business.
You could be left with less money than you put in, and possibly even lose everything.
You may not be able to access your investment if the platforms go down and you may not be able to convert crypto back into cash.
There have also been warnings around crypto-related scams, with people losing large amounts of money.
You should never invest in something you don’t fully understand, and you should never invest in money you can’t afford to lose completely.
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Why is the cryptocurrency market falling?
It is not clear why the crypto market is going down, but China has announced a plan to clean up virtual currency mining, according to CNBC.
The country’s previous moves to crack down on cryptocurrency mining and trading have previously sent the market plunging.
Kunal Sawhney, chief executive officer of stock research firm Kalkine Group, told yahoo finance that a 5% to 10% correction is “quite normal”, given the spike in trading last month.
Major cryptocurrencies fell before following the global stock market sell-off.
That comes after struggling Chinese real estate giant Evergrande stoked broader concerns over the global economy.
Trapped under a huge debt pile, a business default could hit China even more, and it also raised concerns it could affect the crypto market.
China announced a ban on cryptocurrencies in September, when JP Morgan analysts also warned that the market was about to correct after a “retail investor mania.”
And in August, hackers stole 600 million dollars in a crypto heist after the discovery of a “vulnerability” in a blockchain website.
That comes after a series of worldwide crackdowns on crypto markets and another massive sell-off in global stock markets.
5 Risks When Investing in Cryptocurrencies
The Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some crypto-based high-return promotional investments may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptocurrencies, combined with the inherent difficulties in valuing cryptocurrencies reliably, puts consumers at high risk of loss.
- Product complexity: The complexity of some crypto-related products and services can make it difficult for consumers to understand the risk. There is no guarantee that cryptocurrency can be converted back to cash. Converting a cryptocurrency back into cash depends on the demand and supply available in the market.
- Fees and charges: Consumers should consider the impact of fees and charges on their investment, which may be more than the impact of fees and charges on managed investment products.
- Marketing materials: Companies can overstate product returns or minimize the risk involved.
Following the ban, Britons have had difficulty withdrawing and depositing funds into their Binance accounts, according to a report from Financial Times.
The UK is not the only country experiencing crypto difficulties.
Many crypto mining regions in China are cutting operations altogether.
Miners create new cryptocurrencies using a complex computer code in a complex, energy-intensive, and computationally-intensive process.
Authorities in China’s southwestern Sichuan province ordered the closure of cryptocurrency mining projects earlier this summer.
This was followed by Beijing declaring war on Bitcoin mining and trading as part of a series of measures to control financial risks.
Iran has also banned cryptocurrency mining including Bitcoin for nearly four months as the country faces massive power outages and energy-intensive mining.
Meanwhile, poster ads for crypto platform Luno have been banned in the UK for not mentioning the risks of investing in Bitcoin.
The first signs of trouble for the crypto market appeared in May, when Elon Musk announced that Tesla would no longer accept Bitcoin for car purchases.
The Tesla founder has previously caused currencies to spike in value when mentioning them on Twitter or in press statements.
Posting on his personal Twitter account, he wrote: “We are concerned about the rapidly increasing use of fossil fuels to mine and trade Bitcoin, especially coal, which has a high emission worst of any fuel.”
Bitcoin then began to plummet within minutes.
Other cryptocurrencies quickly followed, with several mainstream coins seeing massive declines in value.
The coin suffered another major blow in April when Turkey’s central bank banned the use of cryptocurrencies for purchases.
From Dogecoin and Litecoin to Bitcoin – here are the different cryptocurrencies explained.
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https://www.the-sun.com/money/3278907/why-is-the-crypto-market-down/ | Why is the cryptocurrency market down today?