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Bitcoin Crashes after Dream Run

 Why did bitcoin crash?



Prices of bitcoin declined sharply after it peaked at $58,354 on Sunday. Recently it had achieved the feat of hitting the $1 trillion market capitalization on Friday. 

Declining liquidity

Bitcoin's record rally is now up against a new challenge of declining liquidity in the market. Nikolaos Panigirtzoglou, a strategist at JP Morgan Chase & Co. stated that the liquidity of bitcoin has declined over the past few months. 

Market liquidity is much lower for bitcoin than in gold from which it can be derived that even small flows can have a huge impact on the market.


Elon Musk Factor

Tesla CEO Elon Musk recently said that the price of bitcoin and Ethereum seemed overpriced. His previous tweets have done the work of pumping the prices of Bitcoin and Dogecoin. And now his tweets have led Bitcoin prices to crash.

The other reason that has fueled the rally of Bitcoin is increasing acceptance among mainstream investors like Tesla, Mastercard, and PayPal, etc.

US Treasury Secretary remarks

US treasury secretary Janet Yellen calls Bitcoin extremely inefficient for transactions. She also termed it "highly speculative". She spoke about it when she was talking about post-pandemic recovery in the country.

While she was at the 2021 Dealbook DC policy project she said, "Bitcoin is an extremely inefficient way of conducting transactions, and the amount of energy that's consumed in processing that transactions are staggering."

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