Cryptocurrency is a form of virtual currency based on a network named Blockchain and is secured by a system called Cryptography, making it virtually impossible to counterfeit or double-spend. The decentralized structures of cryptocurrency make it possible for it to exist without the control of the government or central authorities, as opposed to the traditional banking system. Just like any other market, cryptocurrency market values are also determined by supply and demand. The rate of a cryptocurrency that may be traded for another currency might fluctuate greatly because the nature of many cryptocurrencies ensures a high degree of scarcity. Bitcoin's value has fluctuated rapidly, rising as high as US$19,000 per Bitcoin in December 2017 before plummeting to roughly US$7,000 in the months that followed. On (4/23), the majority of cryptocurrency rates dipped. The price of Ethereum had dropped by more than 10% to US$2,140 or equivalent to Rp30.6 million (assuming Rp14,300/US$) at the time. Previously, they had achieved a record of US$2,645.97 (Rp37.8 million), with the most recent deal declining 6.55% to US$2,242.90 (Rp32 million). Bitcoin fared likewise, though not as many as Ethereum. Its value dipped 3.44% to US$49,903.71 (Rp713.6 million) on Friday (4/23), according to Reuters. This happens due to the United States President Joe Biden's new tax policy, which features a plan to boost capital gains taxes to 39.6% for those earning more than US$1 million.
Coingecko stated that in the last week, the capitalization of the crypto money market earned US$779 billion (Rp11,140 trillion). On May 17, the crypto money market capitalization reached US$2,246 trillion, then on Monday (5/24), it fell to US$1,467 trillion. Furthermore, the price of Bitcoin is being sold at US$33,000 per coin (5/24). This price decline extended the record of cryptocurrency‘s weakening price, which has been happening lately. Such reduction is understandable as Bitcoin contributes more than 45% of the global cryptocurrency market. This event happened after crypto investors were shocked by Elon Musk’s announcement, which stated that Tesla stopped allowing the purchase of electric cars with Bitcoin because it is considered non-eco-friendly due to it taking up a large amount of electricity. Aside from Joe Biden’s tax policy and Elon Musk, this plunge in cryptocurrency is also caused by a Chinese financial industry group that decided to ban crypto trading. The Chinese financial industry group prohibited financial institutions and payment companies from providing services related to crypto transactions. “Recently, the value of cryptocurrency has rocketed and then plunged. Speculative cryptocurrency trading has also recovered. Such occurrence seriously violates property security and disturbs the normal order of the economy and financial state,” declared three financial industry groups in their joint statement. Such financial industry groups are China National Internet Finance Association (NIFA), China Banking Association (CBA), and China Clearing and Payments Association (PCAC).
According to JP Morgan, the crypto market witnessed a similar drop in 2017 and 2018, though the current one is laggier. The crypto market's aggressive activity resembled the market's peak in December 2017 to January 2018. Josh Younger, JP Morgan Chase’s head of interest-rate derivatives strategy, too, agrees with this remark. The cryptocurrencies market is very reactive, as many have pointed out. When prices rise, they usually rise quickly because everyone wants to buy. People don't want to hold or buy things if the line isn't going up, so when prices go down, they fall down quickly and remain low. Aside from it’s hindrance from China, analysts claim that cryptocurrencies has evolved into an asset that investors would retain for a longer period of time. Former United States Treasury Secretary Lawrence H. Summers compared cryptocurrencies to gold as a safe-haven asset. There's a strong chance that crypto will remain a part of the system for a long time. In essence Cryptocurrencies values are quite volatile, and as investors, we must be prepared to accept the risk that this cryptocurrencies entails, for instance the lack of intrinsic value, some absence on fundamental analysis, and the high risk that it brings. The trends of cryptocurrencies brings benefits for investors to diverting it’s assets, however they have to be careful on negative catalysts that affiliates with it.
Source :
Bloomberg
CNBC Indonesia
CNN Indonesia
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