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Bitcoin Drops Below 40,000: Here Are Some of the Reasons

In recent months, Bitcoin has been on a roll, going as high as $60,000. This Bitcoin train was unstoppable, having people think it would eventually hit $100,000. Then, things took a turn for the worse. Bitcoin dropped like a rock today, triggering panic selling from many buyers, resulting in a drop of more than 40% in 24 hours. The famous cryptocurrency is now worth less than $40,000. Here are two reasons why.

1. Elon Musk

On May 12, Elon Musk tweeted that Tesla is discontinuing accepting Bitcoin for Tesla automobiles because of the environmental impact of Bitcoin mining. Even though he later tweeted on May 17 that Tesla hasn’t sold its $1.5 billion in coins, the currency’s price continued to fall. The fact that the price plummeted from a simple tweet is concerning: It shows Musk’s power to shift crypto prices with just his words.

2. China

China is just another addition to the list of countries that recently banned or censored Bitcoin. The country has banned financial institutions and payment companies from providing services related to cryptocurrency transactions. This is their latest attempt to clamp down on the crypto world. If financial institutions don’t adopt crypto, it’s much easier to ban individuals from using it in the future. China has the world’s largest population, and if it’s more difficult to buy crypto, Bitcoin will fall in price (based on the rule of supply and demand). In addition, with all these governments starting to ban Bitcoin, people are worried that many more countries will follow, possibly including the U.S.

What now?

The worst thing you could do is panic sell; you would lose your money, and it would make the price of Bitcoin fall further. A possible strategy is a stock market play: “dollar-cost averaging,” or as some people call it, “buying the dip.” Instead of selling, you buy more. You are buying at a lower price, so if it goes up, you make more money. This also averages your cost to buy the coin. So, if you bought Bitcoin at $60,000 and again at $40,000, your average cost to buy the coin is $50,000.

The future is unknown.

Bitcoin is extremely volatile, which we see perfectly in today’s drop of more than $20,000. So, never go all in or put all of your savings into a trade. Do your research, and know exactly what you are getting into before you start investing.

What do you think? Do you think Bitcoin will go back up? Let us know what you predict.

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