Cryptocurrency prices are plunging as the men in suits move in to take over trading.
Bitcoin had a shocking weekend, losing more than 50 per cent in value since hitting peak prices in November and was still sliding when European markets opened on Monday.
In November, Bitcoin was changing hands for £49,803.
At close of business Friday, the value had collapsed to £29,580. On Monday, the price was 5.4 per cent lower – £28,743 with no sign of a rally.
Bitcoin was not the only crypto showing signs of trouble.
XRP, Ether, Solano, Cardamo and Terra were all in the red and the entire cryptocurrency market had shed 3.3 per cent of value.
Table of Contents
Bitcoin was the first crypto and remains the biggest digital currency by market capitalisation. Bitcoin accounts for around a third of the crypto market with a market cap of £516 billion
For more than a decade, cryptocurrency trading was dominated by individual investors who could manipulate the market by releasing or shutting off their vast crypto fortunes from the market.
But that’s all changed recently as professional investors like hedge funds and money managers have moved in.
And as more traditional investors take over, cryptocurrency fortunes have followed the rises and falls of stock markets more closely.
The New York NASDAQ, London FTSE 100, Paris CAC and German DAX have all lost more than 1.5 per cent in value during recent days. In Asia, stocks have seen a 3 per cent drop.
For the traders, buying and selling cryptocurrency comes with a high risk. Following the stock market playbook, traders sell off their risky crryptocurrencies at times of uncertainty to move their wealth into a safer haven.
Inflation is the major uncertainty in the minds of crypto traders.
The concern is a higher cost of borrowing as central banks hike interest rates may have a major impact on economic growth, stagnating economies or pushing them into recession.
The US Federal Reserve has increased lending rates by half a percentage point to 1 per cent, the highest rate since early 2020.
Cryptocurrency is not a special asset for investors, just a different one from stocks and shares.
The rules for buying and selling are the same. Traditional advice is to buy while the price is low to benefit from a future price correction. Experienced investors would look at building a position rather than selling.
If you cannot afford to buy a whole Bitcoin, don’t forget that the digital tokens subdivide into small pieces that are easily affordable for anyone.
But this is a time of high inflation and rising prices, so make sure your bills are covered for up to six months before dabbling in trading cryptocurrencies.
The first commercial Bitcoin transaction took place on May 22, 2010, according to blockchain data. A customer paid for two pizzas with 10,000 Bitcoin. Today, with each Bitcoin valued at £28,743, the bill for those pizzas would be £287.43 million. To commemorate the event, May 22 is known as Bitcoin Pizza Day.
A cryptocurrency is a digital asset that lives on software hosted by a decentralised peer-to-peer (P2P) computer network. The software is a database called a distributed ledger or blockchain. Because data on the blockchain is secured with cryptography, network security is hard to break. Because they are decentralied with no command structure, cryptos are immune to government or central bank regulation or interference.
The first step in buying Bitcoin or Ether is connecting a digital wallet to the internet. The wallet should interact with the cryptos you want to trade. Next, fund the wallet with the appropriate amount of US dollars, Pounds or other hard currency. Now, use the wallet to buy, sell or hold cryptocurrency. Alternatively, buy Bitcoin at a crypto ATM with a bank card.
Asking which crypto is best to trade is like asking which share to buy to make the biggest profit – the answer is always ‘it depends’. There’s is no one size fits all answer and buying crypto depends on how much you have to spend and how much risk you are willing to accept balanced against losing your money. However, the bnest known, most valuable and most traded crypto is Bitcoin.
Most exchanges and some independent websites report on cryptocurrency prices and historical data.
It’s a phenomenon that many investors have noticed – crypto crashes happen at weekends. The crypto market is different from a stock market. Crypto markets are open 24/7 but many of the largest falls are on Saturdays and Sundays. Analysts suggest this is because unlike stock markets, sellers do not have buyers queuing to buy their crypto and even fewer are around at weekends.
Indirect crypto investing is a possibility. One way to invest without buying a crypto is to take shares in a company active in the crypto sector, for instance a business developing hardware for Bitcoin mining. Another is a tracker fund which follows the price of Bitcoin but does not involve the purchase of any crypto.
Besides the cost of the token in a fiat currency, ie US dollars, the exchange or ATM will add a transaction cost. The cost varies between exchanges and depends on their fiat exchange rate and the network’s administration fees. A digital wallet provider may charge a fee as well.