Why is cryptocurrency crashing?
Image source: Getty Images. The cryptocurrency market has historically been very volatile. Its quite common for coins to experience huge gains and losses in relatively short periods of time. Recently, the market has taken a major downward turn, with many coins seeing their value dropping by big margins. Lets take a look. Before we continue, keep in mind that investing in cryptocurrency is extremely high risk and complex. The Motley Fool has provided this article for the sole purpose of education and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in Cryptocurrency or in any other asset, you should always obtain appropriate financial advice and only invest what you can afford to lose. Compare stocks and shares ISAs If youre planning to open a stocks and shares ISA, choosing the right platform is important. To help you narrow down the choices, weve created a list of some of the top stocks and shares ISAs. This year has been quite the roller coaster for crypto. The market started the year very strongly. For example, Bitcoin, the worlds largest and most popular digital asset, hit an all-time high of around 45,000 in April. Ethereum, the worlds second largest cryptocurrency, also reached a new all-time high of 2,950 in early May. But since mid-May, crypto prices have been falling. On Tuesday 22 June, Bitcoin fell below 23,000, according to the crypto price tracking website Coinmarketcap. On the same day, the price of Ethereum touched lows of 1,250. This effectively means that the worlds two biggest cryptocurrencies have lost more than half of their value since hitting their all-time highs. Dogecoin, the meme coin popularised by Tesla CEO Elon Musk, has not been spared either. The cryptocurrency is now valued at around 0.15, way below its May peak of over 0.50. Across the cryptocurrency market, many other digital assets have suffered similar losses. The latest drops in crypto prices come on the back of a major clampdown on crypto trading and mining in China. In May, the Chinese government effectively banned financial institutions and payment companies from providing services related to cryptocurrency transactions. Under the ban, banks and online payments channels are prohibited from offering any crypto-related services, including account openings, registration, trading, clearing, settlement and insurance. Furthermore, these institutions have been directed not to offer savings, trust or pledging services for cryptocurrency, nor issue financial products related to cryptocurrency. Its not just financial institutions that have been banned from handling crypto. China has also been coming down hard on crypto mining recently. Mining is the process by which new units of digital coins are created. China makes up a considerable part of the global crypto-mining infrastructure. Sichuan Province, which is one of the countrys largest cryptocurrency mining bases, is taking steps to stamp out the activity and many miners are now being forced to pack up their bags and go elsewhere. This follows similar moves in the Inner Mongolia and Yunnan regions. According to a report in Chinas Global Times, the recent moves are expected to shut down more than 90% of the countrys Bitcoin mining capacity. This, of course, has stakeholders in the crypto space concerned, and the result has been a market crash. These all-too-common investing errors can cause you to miss out on the long-term wealth-building power that shares can hold. To help you side-step these pitfalls, and move forward on your path to wealth-building, weve created a free report, The 3 Worst Mistakes New Investors Make. Just enter you best email below for instant access to your free copy. Click here! Its impossible to tell. With the crypto market being so volatile, its difficult to predict what will happen next. However, given the markets history, it could be that it will stage a comeback at some point in the future. That said, nobody knows how long this could take. Bear in mind that if the market does recover quickly, a subsequent fall may occur just as quickly. This is why investors are often advised not to invest all of their hard-earned money in crypto and instead only invest what they can afford to lose. The good news is that there are numerous ways of investing that are far less risky. One is stocks and shares investing, which you easily can do from the comfort of your own home using a share dealing account or a stocks and shares ISA. Get a free initial review lasting up to 1 hour, plus 50 off any follow-up advice. MyWalletHero has sourced you a 50 discount off the cost of advice when you find an independent or whole-of-market financial adviser through Unbiased.co.uk*. All advisers are FCA-regulated, qualified and give fully unbiased advice. 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