Last Updated: January 18, 2022
After climbing to its peak value of $65,000 in April, Bitcoin has since been an example of how volatile a cryptocurrency can be. The last two months have been turbulent for the cryptocurrency, leading up to a drop to almost half of its April value on Tuesday, Financial Times reports.
Bitcoin’s value sank to a record low of $28,824 (for this year), effectively losing all that it gained in 2021. Although the value recovered by 18% on Wednesday, it’s clear that Bitcoin is struggling.
It seems that Bitcoin’s rise and fall from grace were influenced by Tesla’s decision to accept Bitcoin as payment and then retract this decision three months later due to the currency’s sustainability issues.
The unsustainable model for Bitcoin mining is drawing more attention and concern, negatively affecting its value and making people question whether they should invest in Bitcoin or even cryptocurrencies in general.
Pressures From China Drive Bitcoin Down
That said, Tesla isn’t the only influence on Bitcoin’s value. China has been making headlines for its stricter regulations towards Bitcoin. Before it started clamping down on crypto and banning Bitcoin mining in major provinces, China used to be the largest cryptocurrency market in the world. However, with it shutting down mining in its provinces, the crypto mining capacity is greatly reduced, as they provided around 65% of Bitcoin’s hash rate just a year ago.
As a result, there are reports of Chinese miners selling their equipment or moving their bases to countries such as the US or Kazakhstan.
Most recently, China closed down a major mining hub in the Sichuan province—one of the largest bitcoin mining centers in the country. A few days later, Chinese regulators urged Alipay not to provide crypto-related services and discouraged other payment platforms and banks from supporting digital currencies. These events are probably what prompted the drastic fall in Bitcoin value on Tuesday.
China is discouraging cryptocurrency use due to concerns around its potential use for money laundering and illegal dealings, as well as its volatile nature. Unsustainable mining is another concern for China as it undermines the country’s efforts towards green energy and carbon neutrality goals.
Bitcoin isn’t the only cryptocurrency affected—on Tuesday, Ether sank to $1,752, XRP to $0,52, and Dogecoin to $0,17. Like Bitcoin, all cryptocurrencies have recovered since. Their quick recovery is a sign that cryptocurrencies are still hanging on, so people thinking about investing, can still benefit from choosing the best trading platform.