What happened to Bitcoin?

Bitcoin price plummeted yet again around 10% on Monday, dragging with it most of the other cryptocurrencies as well. Bitcoin's price as of right now stands at $42 800 (€36 495).

According to Valkyrie Investments CEO Leah Wald, "This sell-off is the continuation of a well-established pattern where traders cash in their riskier assets to cover margin calls or sit on the sidelines until markets calm down and they feel more comfortable going back into riskier positions." (CNBC)

The analysts are saying that this current drop in Bitcoin's price has again a lot to do with what's happening in Asia and China in particular.

What has China have to do with it?

A major Chinese real estate company Evergrande is close to collapse. They are now considered Earth’s most heavily indebted real estate company.

Evergrande's debt is currently $305 billion - this roughly 2% of China's GDP. So the company might be "too big to fail", and could have a domino effect on the world's economy.

Evergrande situation has been compared to Lehman Brothers.

Evergrande's stock price has gone down by 87% since the beginning of the year.

Global economy and Bitcoin

Nik Bhatia, a crypto watcher, said that "Bitcoin responds to the global macro environment and is itself a product of it." (source)

Fundstrat’s Tom Lee said to CNBC that "I don’t think bitcoin’s decline today is actually very ominous, but it is showing you that people really value liquidity."

While Bitcoin doesn't necessarily move in the same direction as the stock markets, it's still influenced by it.

Bitcoin's recent swings

Bitcoin managed to climb up from it's crash late spring and it traded above $50 000 for a while, but now it's back to survival mode. Especially considering the current Bitcoin (BTC) price is below its 50-day moving average of around $46 000.

Bitcoin is currently down around $10 000 since it's Septeber high of $53 000.

While many traders seem to be worried about the recent market movements, this kind of extreme swings, both up and down, are rather common in crypto market - they have happened before and they will happen again.

It's partly exactly the volatility of it all that makes the cryptocurrencies so attractive to many individual investors.

Investing in cryptocurrencies is risky

Crypto market has always been a particularly volatile one and while it's true with pretty much any investment, you should only invest money in cryptos that you can afford to lose. Cryptocurrencies are not any kind of get rich quick money scheme. Obviously it has tremendous potential, but there are obviously no guarantees of any kind.

Cryptocurrencies should not be bought in hopes for quick payoff. Rather, if you do want to start investing in cryptos, we recommend you buy it for long term.

The price changes all the time, so you if it's down 20%, it's usually a bad idea to sell it at a loss. Just holding it long term might be a better idea here.

What are others doing right now?

Many experienced traders use the drop in price as an opportunity to add new Bitcoin to their portfolio. Even El Salvador, the only country in the world where Bitcoin is a legal currency, decided to add 150 Bitcoin to its portfolio.