The cryptocurrency bubble burst is the phenomenon of a sudden crash in the price of cryptocurrencies. These include the likes of Bitcoin, Ethereum, Dogecoin, and more. Most of the crashes do not last for a long time. The prices begin to recover.
And soon enough, investors start to pour into the cryptocurrency market. Thus making the cryptocurrency price surge again, according to allin1bitcoins.com reports.
The first cryptocurrency bubble burst happened in 2018 when the Bitcoin price dropped by 65% in Feb 2018. The next dramatic crash happened right after the Bitcoin price boom of 2021.
In March 2021, the cryptocurrency price plunged deeply. However, the price is now on an incline. This phenomenon is due to investors entering the market to invest in the fluctuating prices of Bitcoin.
Reasons behind the Bitcoin bubble burst
The Bitcoin bubble is going to implode soon. Most investors believe that Bitcoin is experiencing a natural dip in prices. Cryptocurrency experts have cited the reasons below that might make the crypto bubble burst soon:
1. Minimal utility of Bitcoin in the real world
Bitcoin is hardly helpful in the real world. Even though a few business organizations accept cryptocurrencies like Bitcoin, Ethereum, and Dogecoin, many business organizations that accept Bitcoin are very few.
News reports recorded in December 2020 that only 15,174 companies in the world authorize Bitcoin. The uselessness of Bitcoin beyond the virtual world is one of the prime reasons behind the cryptocurrency bubble burst.
2. Centralization is a significant issue
The primary objective of cryptocurrency in the economy is decentralization. However, according to the statistical reports of BitInfoCharts.com, the ownership of Dogecoin and Bitcoin is centralized.
Only 2155 wallet addresses own approximately 42% of Bitcoin, while just 99 wallet addresses own around 66.7% Bitcoin.
Cryptocurrency enthusiasts admit that Bitcoin has not received good decentralization. At least, not in the manner, all expected it to have. The semi-centralized nature of Bitcoin will lead to the Bitcoin bubble bursting someday soon.
3. Elon Musk is giving Mixed Signals
The cryptocurrency bubble burst is going to happen soon, owing to the tweets posted by Elon Musk. Initially, Musi had been immensely enthusiastic about Bitcoin.
His company, Tesla, purchased Bitcoin worth $1.5 billion. Tesla also incorporated Bitcoin as an authentic currency for transactions. However, after a couple of months, Musk tweeted that Tesla had withdrawn Bitcoin from its list of accepted currencies. Musk withdrew his support for Bitcoin owing to the adverse environmental impact of cryptocurrency mining and production.
The sudden withdrawal of consent from Bitcoin led to a dramatic plunge in cryptocurrency prices. Elon Musk has, since then, shifted his focus to Dogecoin. Elon Musk is one of the prime contributors to the imminent cryptocurrency bubble burst.
4. A majority of the sovereign nations and their governments are not in support of cryptocurrency
The Bitcoin bubble will explode because most of the world’s financial authorities are against cryptocurrency transactions. The Chinese government recently imposed a strict nationwide ban on cryptocurrency mining and commerce.
The crackdown on Bitcoin mining in China drove down the prices of Bitcoin. The governments of several countries like Turkey, Algeria, Nigeria, Ecuador, and Bolivia have imposed a ban on digital currency payments and cryptocurrency services. The withdrawal of governmental support of cryptocurrency is going to make the cryptocurrency bubble implode soon.
5. Excessive leverage is going to ruin the cryptocurrency market
Most investors usually over-lever the cryptocurrency market. It often leads to their bankruptcy and consequent withdrawal from the market. Several cryptocurrency markets allow the investors to invest in Bitcoin and other crypto-assets with 50-125 times leverage on the equity of their accounts. The significant influence makes the Bitcoin price plummet drastically.
According to Bloomberg reports, more than 887,000 cryptocurrency accounts worth $9.4 billion got liquidated, leading to a decline in the price of Bitcoin. Excessive leveraging of Bitcoin may trigger the cryptocurrency bubble burst.
Currently, the price of Bitcoin is around $36,300. The Bitcoin bubble is going to burst in probably the near future. However, investors need not panic as the costs will recover soon enough, and the market will flourish again.