Why Did Bitcoin Crash In May 2021?
On April 13th, 2021, Bitcoin was sitting at a price of almost $64,000 per coin. But then over the next month, the price began a long tumble to where it is currently sitting at about $38,000 as of the writing of this article. This has left people, especially first-time investors in the coin, reeling. They’re wondering why this happened and what they can expect for the future of the coin. There is probably some thinking that they may have misplaced their trust in the coin.
But this crash, or dip in the market, is just that, a dip. If you look at the history of the stock market, this kind of stuff happens all the time and no one bats an eye. So why did it happen? And what does this mean for the future of Bitcoin? Keep reading to find out.
Bitcoin Vs. The Stock Market
As mentioned above, companies which are listed as publicly traded on the stock market often experience frequent dips in price and no one begins to panic. But when Bitcoin takes a small plunge, people start to pull their hair out. Why is this? Well honestly, when a certain product on the stock market takes a dip, people just don’t tend to notice and that why they don’t panic.
Look at it this way, when you ask someone about stocks, they may be able to tell you about the GameStop fiasco of early 2021, or what Tesla stock did during the COVID-19 pandemic. But when you ask them if they are worried that the stock prices fell for Radio Shack in the early 2000’s, they might look at you as if you are crazy. This is because people tend to only know about the stocks that are doing really well and are popular among buyers. There are so many stocks on the market, that it is impossible to follow every single one. This is why they measure the stock market as a whole, and when that number goes down, people do panic, even if their individual stock is doing okay.
This is because people get tunnel vision on the stock they own, or on the overall number which predicts the health of the market. People are reacting strongly to the decline of Bitcoin because it is the only cryptocurrency they know, as well as their only indication of how the cryptocurrency market is doing. This resulted because people simply can’t follow every cryptocurrency on the market and have defaulted to buying Bitcoin. And not only that, but most people buying the cryptocurrency don’t understand it. And when people don’t understand it, they begin to fear it, and this can lead them to making irrational decisions.
Why Did Bitcoin Fall?
The reason Bitcoin hit such a steep decline in April 2021 is for a number of reasons. The foremost is because of social media campaigns which have proven throughout the past couple of years to dictate everything from what the people buy to how they vote. These social media campaigns are so powerful they led to the bankruptcy of several hedge funds earlier this year because of the GameStop stock buying fiasco that was perpetuated on Reddit. And Bitcoin isn’t immune to this bad publicity. In fact, it was a tweet by Elon Musk that began the current crash the market is experiencing.
But you can’t blame this entire thing on Elon Musk. Another factor that must be considered is that tax day was moved to May 17th. This means that many people, who have been claiming unemployment over the past year (without having taxes deducted) probably began to file their taxes in late April and realized they owed the government thousands of dollars. And since many people have turned towards investing instead of holding savings accounts, this means they had to pull that money back out of their investments to pay taxes. This also means that they stopped buying more Bitcoin temporarily. Thus, the overall demand in the coin was reduced, leading the price to decline.
Additionally, there have been a few technological issues in the Bitcoin world lately, namely an issue with a mining company in China. This has led people to have more fear than normal in the cryptocurrency world and to withdraw their investments. Not to mention that there was a temporary problem in the United States with fuel lines that led to many people believing a fuel shortage was imminent (it wasn’t) and that’s another reason people may have sold their Bitcoin investments because they wanted to stock up on fuel.
Will Bitcoin Ever Rise Again?
Basically, if you’ve made it this far, you understand that Bitcoin is currently experiencing a shortage of demand. This is nothing serious. Although it does seem serious to most people that the coin lost $25,000 in value overnight, this is typical of items which depend only on the laws of supply and demand for sales. And cryptocurrency tends to be more unstable than other commodities in the financial world.
This doesn’t mean you should stop buying Bitcoin. The smart people, probably even Elon Musk himself, are honestly taking this opportunity to buy more. This is because the age of cash payments is on its way out. Soon the entire world will need a digital currency, and even if it isn’t Bitcoin that fits the bill, Bitcoin is a digital store of money that seems to be only gaining value over time. If you look back at past charts of Bitcoin, you will see that there have been many peaks and crashes in the value of the coin. But despite the “crashes” you may see, the coin in still on an upward trend no matter how you look at it. This means that it is likely here to stay whether the doubters like it or not.
Of course buying Bitcoin always carries risk, and there is a chance the currency could go to zero tomorrow. But the supporters behind Bitcoin are now bigger than ever, and include companies like Visa, PayPal, and CashApp. And if these giant companies are still supporting the coin, then there’s no reason to believe that this technology will be gone tomorrow.
Overall, when Bitcoin loses value, it is scary, even to the most seasoned investors in the stock market. But these investors also know that when something has value, it will recover, and therefore they invest more. So next time you see Bitcoin crashing, don’t think of it as a crash, but rather a sale, and consider adding more Bitcoin to your investment portfolio.