Bitcoin fell from around $ 47.000 to $ 41.600 on Monday according to data from CoinDesk. The collapse prompted El Salvador's President Nayib Bukele to encourage people to "buy low". El Salvador became the first country in the world to officially announce Bitcoin as a form of legal tender two weeks ago.
“We just bought in decline (in technical jargon 'in dip'). 150 new coins! El Salvador now owns 700 coins, ”Bukele tweeted.
“They can never beat you if you buy low. Presidential Council ".
It is important to note the volatility of the currency which has seen large rises and falls throughout its history. People invest at their own risk and Bitcoin and other cryptocurrencies are not regulated by the UK financial authorities.
The Financial Conduct Authority (FCA) warned in January: "Investing in cryptocurrencies, or related investments and loans, generally involves taking very high risks with investor money."
Why did the cryptocurrency collapse?
One of the most important factors is believed to be the possible collapse of the Evergrande Group, a real estate company in China that is facing $ 300 billion (£ 219 billion) debt.
The collapse of cryptocurrencies is also in line with losses recorded in the stock market, with experts believing that cryptocurrencies are starting to behave more like traditional assets.
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, told Forbes: “With the influx of institutional investors and a general overlap of market participants, we have seen markets become increasingly interrelated.
"Moving forward, these correlations are likely to strengthen further as the pool of market participants in traditional and cryptocurrency markets becomes more homogeneous."
What could happen now?
The cryptocurrency is notoriously volatile, which makes it very difficult to predict what might happen after a crash. Bitcoin could recover and go back to one quotation record, or it may freeze and never return to a certain level. This is what makes it a risky investment and you should only ever invest what you can afford to lose.
Vinny Lingham, co-founder and CEO of Civic, told Forbes that he believes the long-term outlook for the cryptocurrency is still solid. “All liquid assets are affected when global markets are disrupted. We saw it at the beginning of Covid, ”he said.
"Cryptocurrencies are not immune, but they will likely outperform other assets in the long run as the money entering cryptocurrencies is protecting itself from other risks in the wider economy."
And what do you think of the cryptocurrency crash that took place on Monday? Will it be a black week for digital assets or will they be able to recover and set new record prices? To you the comments in the section below.
