It has fallen by more than 23% in 4 trading days——

  Why are virtual currencies plummeting again?

  Our reporter Li Hualin

  Bitcoin is down again and again.

Recently, Bitcoin has ushered in a "waterfall" plunge. From January 21 to January 24, it fell from about US$43,000 to about US$33,000, with a cumulative decline of more than 23% in 4 trading days, a record since 2012. Worst start to the year since.

  In addition to Bitcoin, other virtual currencies have not "survived".

Ethereum, the second largest virtual currency by market value, also fell below $2,200 from around $3,200, plummeting by more than 30%.

Dogecoin, SHIB, etc. are also in a sharp decline. Nearly 10 billion yuan of funds in the virtual currency trading market have been wiped out. Voices such as "Bitcoin collapse" and "Break Winter in the currency circle" are one after another.

  In fact, this round of falling cycle has been oscillating for nearly 3 months.

Since Bitcoin hit a new high of $69,000 in early November 2021, it has fallen all the way. As of now, Bitcoin has fallen 50% from its highest point, and the total market value of virtual currencies has shrunk from a record high of $2.9 trillion to 1.9 around a trillion dollars.

  For the collapse of virtual currency, market participants analyzed that it was the result of the resonance of multiple negative factors.

  "On the one hand, the Fed's rate hike process has accelerated, and the tightening of monetary policies in many overseas countries has caused risk assets to plummet. Moreover, the current virtual currency market is increasingly correlated with U.S. stocks, and the recent decline in U.S. stocks has also driven the entire virtual currency market to decline. ” said Zhao Wei, senior researcher at OKX Research Institute, a well-known digital asset trading platform.

On the other hand, although the virtual currency market has been depressed recently, the NFT (non-fungible token) market is booming. More and more institutions hope to "make money" from it, and try to replace the assets in the hands of investors with NFT. Many project parties cashed out after obtaining the expected funds through NFT sales, aggravating the selling pressure of the entire market.

  Virtual currencies are also facing increasing regulatory pressure from around the world.

Recently, regulatory authorities in many countries have indicated that they will take measures to strictly supervise virtual currencies.

The Central Bank of Russia said it would propose a ban on virtual currency trading and mining, and a ban on financial institutions from investing in virtual currency and related financial instruments.

The EU's top financial regulator has called for a ban on major modes of bitcoin mining across the EU.

Regulators in the U.K., Spain and Singapore have all said they want to tighten rules on advertising virtual assets to inexperienced investors.

  In my country, the regulatory policies for virtual currency continue to increase.

Since last year, the central bank and other departments have introduced a series of policies and measures to prohibit financial institutions from conducting and participating in virtual currency-related businesses, cleaning up and banning domestic virtual currency transactions and token issuance financing platforms, and increasing verification and rectification of "mining" efforts. Extinguish the "false fire" of virtual currency speculation.

  Strict supervision and superposition of the mutated strain of the new coronavirus, Omicron, continue to spread, etc. Under the multiple bad news, virtual currencies such as Bitcoin have been declining all the way.

Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, said that virtual currency has no real value support, does not have the sovereign credit of legal tender, and lacks a wide range of application scenarios, and its price trend is easily affected by market news.

  Looking back on the development history of Bitcoin, the sharp rise and fall is its consistent performance.

Changes in the direction of regulation, the buying and selling of several investment giants, and even a word from some people can cause their prices to fluctuate violently, resulting in a “stampede accident” of massive selling in the short term.

For example, in December 2017, Bitcoin set a record of $19,000, and then the price fell all the way, once almost falling below $3,000, and fell 80% within a year.

On January 11 last year, Bitcoin fell from nearly $40,000 to $30,000, plummeting nearly 20% in one day, and more than 200,000 people liquidated their positions.

  "The 'myth of making wealth' of virtual currency attracts many investors to speculate, but from the perspective of past performance, its volatility is several times that of ordinary stocks, and the wealth of many leveraged participants is 'looted overnight'." Zhou Maohua said that virtual currency The characteristics of currency make it difficult to analyze it with traditional fundamentals and other valuation methods. It is more like a high-risk alternative speculative product and is not suitable for ordinary investors.

  "In my country, bitcoin and other virtual currency transactions are not protected by law, and the regulatory authorities have already made their position clear, and investors need to guard against potential risks." Zhou Maohua said that under strict supervision, the current domestic initial coin offering (ICO) is almost eliminated. The "mining" activity has also died down, but there are also many platforms and institutions that have relocated overseas to continue their activities.

To better prevent and defuse the risks of virtual currency trading speculation, it is still necessary to strengthen international regulatory cooperation, share regulatory information, and solve many problems in cross-border virtual currency supervision.

At the same time, it is necessary to increase publicity efforts to remind investors of the risks of speculation and speculation about virtual currencies.

In addition, the development of virtual currency technology should be further tracked and researched, and the pace of research and development and promotion of legal digital currency should be further accelerated.