Cryptocurrency has had a month to forget, after a series of falling values across almost all types of digital coin. But investors have been told to not give up on crypto just yet, with a future price boost on the cards.
The market plummeted on Friday afternoon (May 21), after China commented on cryptocurrency for a second time this week.
Earlier this week, China announced new measures to block cryptocurrencies from being used as payment.
A prospective ban would see financial institutions and payment companies unable to offer clients any service involving digital coins, including trading, clearing and settlement.
Now, China has once again threatened to take action on digital coins.
READ MORE: Bitcoin price crash – cryptocurrency plummets in wake of Chinese threat
But, despite the second price crash in the space of four days, Nickel Digital’s CEO, Anatoly Crachilov, still thinks the future looks bright for cryptocurrency.
The latest price drops are helping to clear “speculative considerations”, which are essentially fad investments.
Getting rid of these types of investors will help to stabilise the market, and subsequently deliver positive prospects, he said.
“In April, Bitcoin’s valuation hit an all-time high, delivering 122 percent gain from the beginning of the year, while Ethereum has demonstrated an even more impressive run of 479 percent,” he said.
“This rally attracted billions of dollars of both institutional and retail capital. While the former often comes in the form of portfolio allocations, the latter is often driven by speculative considerations, in most cases with a use of significant leverage.
“These overleveraged positions bring vulnerability to the market, making it excessively sensitive to negative news flow.
“A combination of statements coming from Vitalik Buterin, Elon Musk and Chinese authorities in a space of a week was sufficient to trigger a market correction.
“This was exacerbated by a cascade of auto liquidations of overleveraged positions on crypto exchanges, which amounted to over $9billion in 24 hours, one of the largest volume of liquidations ever.
“The large falls in valuations seen this week are, in one way, ’healthy’ as they enable the market to clear excess speculative positions and consolidate before its next phase of expansion. We have seen this pattern time and again across multiple cycles and expect this to remain in place until the market matures and achieves a larger involvement of institutional capital.”
How to buy cryptocurrency
You can buy crypto online via a cryptocurrency exchange – for example, Binance.
But, you should always think hard before jumping in and investing in crypto.
The markets are incredibly volatile, and there’s no guarantee of success, so you should make sure you can afford to lose any money that you invest.
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