May 19, 2021

In the Lime Light: Is this THE END for cryptocurrency?

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What happened?

China has banned financial institutions and payment companies from providing services related to cryptocurrency, warning investors against speculative trading.

According to a report by Bloomberg, China is home to about 70% of the world’s bitcoin-related calculations deriving from IP addresses based in China.

Prior to this, the cryptocurrency market has already been under pressure after Tesla’s Elon Musk declared that Tesla will stop accepting Bitcoin payments, due to the “rapidly increasing use of fossil fuels for bitcoin mining”.  To make matters worst, the world’s biggest cryptocurrency exchange, Binance, came under investigation by the Justice Department and IRS, as it faces probe by US money laundering and tax sleuths. 

The total cryptocurrency markets are now down more than 20% from their peak in May, although it is still up a staggering 1.5x since the start of the year. 

Global cryptocurrency total market cap (year to date)

Source: coinmarketcap

Bitcoin has lost more than 30% from its peak, but is still up 30% year to date.

Ethereum is also down nearly 30% from its peak, but is up nearly 4x year to date, outperforming its big brother, Bitcoin.

Source: coinmarketcap

Cryptocurrency crashes are common – but also scary and big

Looking back into history, cryptocurrency crashes have been big and probably not for the weak-hearted. Here is an old image of the bitcoin crashes as compiled by howmuch.net and if history was a guide, it ranges from 30% to as much as 87%. 

Source: marketwatch & howmuch.net

Its not all bad… and probably not the end for cryptocurrency.

As bad as all the headlines may look right now, it is worth taking a step back to look at things from the broader perspective. The cryptocurrency has came a long way since and is in a much better position now than it was a few years ago, with greater adoption among institutions and consumers and the increased access provided by companies such as Paypal, Square, and investment firms such as DBS, Goldman Sachs etc for investors. 

The practical utility of cryptocurrency has also been affirmed with the EIB launching its first digital bond issuance on the Etherum blockchain platform in April 2021. 

So is this a buy on dips market? Pls let us know in the comments section below.

Disclaimer: The writer owns Ethereum and other digital coins at the point of writing.

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