Why did the Crypto Market Crash in 2021?

Damini Bhandary Damini Bhandary
Oct 2, 2021 5 min read
Why did the Crypto Market Crash in 2021?

We are at a time, where digital currency holds the utmost importance, in our life. Payment card, UPI, and now cryptocurrency, it seems like complete domination is inevitable.

The digital currency has literally grasped the mind of people and the big stacks of notes may become obsolete in the future. In recent years, Cryptocurrency has somehow started gaining momentum, especially amongst the younger generation. So much is the craze that almost everyone is willing to invest some funds in them.

Cryptocurrency at this point has been able to gather attention on itself from everyone. Some are already investing, some are speculating, and some are just watching it from the side. Whatever it is, the worldโ€™s eyes are on this, and it cannot be ignored anymore.

The rising star suddenly got a bump in the road, this year in the month of May, Cryptos suddenly saw a great deal of decline, and the market got crashed. Again on the mid of September, the market crashed and somehow it has created tension.

โ€œAs the value goes up, heads start to swivel and skeptics begin to soften. Starting a new currency is easy, anyone can do it. The trick is getting people to accept it because it is their use that gives the โ€˜moneyโ€™ value.โ€

โ€“ Adam B. Levine

In this article, we will find out about the reasons for the crashing of the Crypto market. Before that, letโ€™s find out about what Cryptocurrency is.

What Is Cryptocurrency?
The Reasons For Crypto Market Crash
FAQ

What Is Cryptocurrency?

A cryptocurrency is a form of digital currency that is decentralized in nature, with the help of Blockchain technology that means it is not controlled by the government or any other mediator.

It is the direct exchange of this digital currency between two people. People use this to buy goods and services but mostly they are used for investment. Most of the countries still havenโ€™t declared it as legal tender.

There are some common forms of cryptocurrency that are used in the world and they are:


Cryptocurrency is readily redefining the future of finance sector in India
Cryptocurrency or digital currency has a huge impact on Finance industry and it is helping it grow over and above. It is attracting attention all over the world

The Reasons For Crypto Market Crash

As mentioned above Crypto market crash in the month of May and again in September of this year, the fluctuating nature of cryptocurrency is creating uncertainty amongst investors and others. There are a few reasons that can be identified to be the cause of the crashing of the cryptocurrency market.

Elon Musk Denies Cryptocurrency

In the month of March 2021, Elon Musk the CEO of Tesla, the most valuable car company announced that they are willing to accept the most popular cryptocurrency, that is Bitcoin as a payment method in the USA. With that, it was also said that they will try to introduce this payment method in other countries as well.

The problem arises when Elon Musk declared in the month of May, that they will not allow any cryptocurrency as a method of payment, the main reason for this, they portrayed was the environmental issues. As bitcoin mining required a huge amount of electricity, it is not eco-friendly enough, this statement leading to 30% crashing of major cryptocurrencies like Bitcoin, Ethereum, and others.

Elon Musk tweet about Tesla & Bitcoin
Elon Musk tweet about Tesla & Bitcoin

By the month of July, the market experienced a 50% dip, and that was quite a lot. Bitcoin faced a 35% plunge at that time.

Bitcoin Price after Elon Musk tweet
Bitcoin Price after Elon Musk tweet

We can say that, although cryptos future seems great, but it not being environmentally friendly is causing it a great deal of concern. The news causes apprehension and over 8 lakh traders decimate their investment.

Chinaโ€™s Ban On Cryptocurrency

The reason for the crypto market crash in May was not only Muskโ€™s Tesla but also Chinaโ€™s ban on financial and payment institutions of using cryptocurrency. All the popular ones like Ethereum, Cardano, and Dogecoin showed a dip of 15% to 20% after the major blow.

China asked the institutions to refrain from providing services to those who are trying to get them by using cryptos and ordered banks to stop providing support to cryptocurrencies. China even instructs bitcoin has to close down its mining operation in Sichuan and like that it got shut down there.

Even though this prevention did some damage to this digital currency market, in August the market saw a surge, and as per the report, the value rise above $2 trillion.

The good weather didnโ€™t stay good for a long time; China central bank permanently announced that any transaction done with cryptocurrencies is illegal and banned any type of virtual currencies use.

As per them, it placed people's assets in danger. China banned the trading of cryptocurrencies in 2019 but foreign exchange through online continued happening.

This announcement of China in the month of September of 2021, put the last nail on the coffin of the crypto market in the Worldโ€™s most populous country. Following this announcement bitcoin showed a 9% drop again.

China was one of the top names in the crypto industry but this sudden move has plummeted the virtual currency business in the country, with that it has also destabilized the entire crypto market of the world.


Why was Bitcoin Crashed after it became a currency in El Salvador?
As El Salvador declared Bitcoin as a legal tender bitcoin witnessed a massive crash but was the crash because of El Salvador?. Lets find out

Conclusion

Although this fluctuating nature of cryptocurrency is turning peopleโ€™s heads more towards into them but with industry giants like Tesla giving up and refraining from considering crypto coins as a method of payment is straining the virtual currencies presence in the market.

Not to forget Chinaโ€™s ban on crypto is questioning the digital currencies' entire authenticity because of that people are now being skeptical over-investing in them.

FAQ

What is cryptocurrency?

Cryptocurrency is a digital currency that is decentralized in nature.

Is Cryptocurrency Banned In China?

Chinaโ€™s Central Bank termed all virtual currency transactions illegal, which is done by cryptocurrency from 24th September 2021.

What is the reason for Cryptocurrency crash?

Cryptocurrency crashed in may because Elon Musk denied purchase of tesla using bitcoins and later China banned all the cryptocurrency transactions.

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