If you began investing in Bitcoin in the last year or so, the fall in BTC to INR valuation has been difficult to watch. But remember, every asset has its ebbs and flows. Bitcoin, despite being one of the best-performing assets in the last few years, has not been spared either.
It is not only bitcoin that is falling, but most other major cryptocurrencies tanked 5% or more in the last few weeks, as per data from several bitcoin exchanges in India.
This article tries to decode the bitcoin crash and understand the reasons behind the fall.
How does Bitcoin work?
Bitcoin is a digital currency not attached to a government or a banking body. Its deregulated nature allows users to carry on transactions anonymously and results in high volatility in its pricing. Here, users “mine” coins by using high-end computing power to verify other users’ transactions. It, in return, enables them to earn BTC.
Today, you can buy it across several bitcoin exchanges in India. When the owner transfers their holding to someone else, its underlying codes (digitally signed) travel to the person buying them.
Why is Bitcoin falling?
The first four months of 2021 saw a good run in bitcoin prices. It touched USD 50,000 in January and crossed USD 50,000 in the next month. It is when Elon Musk’s announcement that Tesla had invested USD 1.5 billion in BTC came. It also started accepting cryptocurrency as a mode of payment for its vehicles. The result? It hit an all-time high in April.
But it was soon followed by a reversal of stand and a subsequent deterioration in fate too. Tesla cited negative environmental impact and changed its stance on crypto, and the world saw a steep fall in BTC price in India and across the world.
Soon the Colonial Pipeline hack came. It drew attention to how criminals are using it to their benefit. As if it was not enough, the Chinese crackdown further led to the plummeting of BTC to INR valuation.
It came after years of soft signalling that it wants to ban bitcoin and other cryptocurrencies. In May 2021, it also banned financial institutions and payment companies from providing crypto-related services. June saw it undertaking mass arrests in China of people suspected of using cryptos in an unscrupulous manner. Weibo, the Twitter version of China, suspended crypto-related payments, too, further clearly signifying its stance.
It took a step further in July and has recently undertaken a severe crackdown on mining and trading in BTC in Beijing. So it is evident that China is on a full-scale war against cryptos, and it has resulted in BTC to INR and other valuations plummeting significantly.
What should a layman investor do?
With BTC price in India falling at such a steep pace, it has investors in a conundrum of what follows. The last few years have seen greater adoption of cryptocurrencies, and there is no reason to believe that they are a viable alternative to fiat money.
Even after such a fall, BTC to INR valuations presently is significantly above compared to the same in the last year during this period. But before you head over to any of the bitcoin exchanges in India and make your first purchase, it is imperative to understand that you can stand its excessive volatility and won’t be fazed if the price falls.
If you have made up your mind, click here to visit ZebPay, the best bitcoin exchange in India, to buy bitcoin in India.