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Bitcoin recovering after huge crash wiped out 23% of its value

Bitcoin
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Editor's note

The information on this page should not be used as investment advice. Tom's Guide can not tell you whether you should invest in a particular cryptocurrency, or in the market as a whole. Crypto prices can go down as well as up and you could get back less than you put in.

The crypto market is recovering after a massive crash that saw almost all of the top cryptocurrencies lose a dramatic amount of value in little more than an hour

Bitcoin (BTC) was among the hardest hit, dropping 23% in just 65 minutes on Wednesday morning, from $39,299 to $30,415. As Bitcoin leads, other cryptocurrencies tend to follow, and it was a bloodbath across the market, with nearly $1 trillion wiped off the entire crypto sector at one point.

Ethereum (ETH), the second most valuable cryptocurrency by market cap, dropped from $2,769 to $2,051 within the same time span, while other top coins including Binance Coin (BNB), Dogecoin (DOGE), and Cardano (ADA) experienced similarly massive drops in price. 

In fact, Dogecoin — the popular memecoin that has surged in value so far in 2021 — had a larger fall than most, shedding about one-third of its value as it tumbled from $0.38 per coin to $0.25 this morning alone.

Amidst the chaos, popular exchanges including Coinbase and Binance went down from seemingly overwhelming demand, preventing users from accessing their funds and/or “buying the dip,” as some crypto enthusiasts are wont to do. Ethereum gas fees, or transaction fees, jumped as investors turned to decentralized exchanges such as Uniswap instead.

Fortunately for investors, the rapid market decline proved to be temporary, and crypto prices have regained some of the ground lost earlier today. Bitcoin’s price currently sits just above of $38,000, according to CoinGecko, meaning it's now down just 10% over the last 24 hours. Ethereum is hovering above $2,600, meanwhile, after briefly popping above $3,000, but it is still down 21.9% since this time yesterday.

One of the factors behind the crash is thought to be the Chinese government's decision to ban financial institutions from providing cryptocurrency-related services. It also warned investors against speculative crypto trading.

Tesla CEO Elon Musk, widely seen as a key reason why Bitcoin’s price has fallen so sharply over the last week due to Tesla’s about-face on accepting BTC, may have actually helped stabilize the market today. 

His tweet stating “Tesla has diamond hands” (using emoji), referencing the crypto meme of holding tight to coins even amidst market fluctuations, precipitated the return in value for Bitcoin and other cryptocurrencies following the morning crash.

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Musk’s tweets often have direct correlation to the value of cryptocurrencies, as seen in the past with both Dogecoin and Bitcoin. Sometimes the impact is positive — such as when he shared news in January that Tesla had purchased $1.5 billion BTC and would accept Bitcoin as payment for cars, or when he shares DOGE memes.

However, last week’s news that Tesla had stopped accepting BTC due to its environmental impact — and other, similar tweets thereafter — have apparently drained the top cryptocoin of much of its value this past week. In fact, a protest coin called StopElon has emerged in the wake of Musk’s so-called “betrayal” of the crypto faithful.

Cryptocurrency prices are famously volatile. While 2021 to date has yielded huge gains for many of the top coins, including fresh all-time high prices, today was a reminder that major corrections often follow bull runs. Fortunately, some of this morning’s losses have been undone, but investors should keep a close eye on the market for any potential aftershocks.

Andrew Hayward is a writer and editor based in Chicago. His work covering tech, crypto, games, and esports has appeared in more than 100 publications around the world, including Polygon, Rolling Stone, Decrypt, and Stuff. He has covered cryptocurrency extensively since 2019, including coins, crypto games, and NFTs, and interviewed many creators and prominent figures in the space. He has also personally invested in several coins and currently holds less than 1 BTC, 2 ETH, and 700 ADA, along with smaller amounts of other coins. View all articles by Andrew here.

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