The cryptocurrency circle shocked 24 hours, 580,000 people’s dream of getting rich shattered

Musk’s unprecedented influence on the cryptocurrency circle and his inconsistent tweets have changed the attitude of other cryptocurrency participants towards Musk from “hitchhiking” to “drawing a line in the sand”.

The cryptocurrency circle shocked 24 hours, 580,000 people's dream of getting rich shattered

“One hour I was talking and laughing, the next second I was directly confused.” Wang Shuai (a pseudonym), a cryptocurrency investor, told the author at around 10 p.m. Beijing time on May 19.

As night fell, the sharp drop in virtual currencies shocked the entire cryptocurrency community. Among them, Bitcoin dropped about 34% from the day’s high, once falling to $29,000; Ether (ETH) was once decimated; other newly popular coins, such as Dogcoin and Shiba Inu coin, also fell by 56% and 64% respectively at one point.

“This big drop ranks in the top 10 in history.” Wang Shuai, who started contacting Bitcoin eight years ago and has experienced many ups and downs, told the author that the book value of the virtual coins he held plummeted by nearly 500,000 yuan during the plunge on the night of May 19, leaving him with just over 1 million yuan. He did not disclose the cost price of the coins he purchased.

The “heartbeat” of the “cryptocurrency veterans” is more painful than the “frightening night” of the new leek.

The market data platform “Coin Coin” data shows that as of 7:30 a.m. on May 20, the total burst of positions in the past 24 hours amounted to $6.91 billion (about 44.4 billion yuan), about 580,000 people burst positions.

The reason for the blowout is that more people use the contract leverage trading provided by the coin speculation platform. Whenever the market drops rapidly, investors are too late to make up for the margin and will face forced liquidation by the trading platform. The fact that hundreds of thousands of people blew up their positions means that more recent speculators have used higher multiples of leverage in their trading, reflecting the blind optimism of the buyers for the late market.

Although the bitcoin and other virtual currency market seems to be gradually “recovering lost ground” after 3 hours, bitcoin is back near $40,000, but the bursters have already lost their wealth, but never come back.

After a night of shock in 519, bitcoin resumed its decline to near $36,000

I. The cryptocurrency world suffered a regulatory “moment of clarity”

Over the past year, the prevalence of a speculative boom has led to a surge in virtual currency varieties and trading volumes. In overseas markets, Elon Musk, the world’s second richest man, allowed Tesla to accept bitcoin for cars, and legendary investor Paul Tudor Jones proposed a way to buy virtual currencies to fight inflation, both sucking more people into the virtual currency market in the 2020 run.

“Some of the cash that the U.S. government would have disbursed for bailouts during the epidemic flowed into zero-commission trading platforms.” A U.S. stock analyst told the authors, “The new trading platforms’ more convenient trading interfaces have gamified speculation in stocks and coins, and the epidemic-induced work-from-home trend has also made online community discourse more influential. The wealth effect has kept more people involved, as if everyone has become a day trader, and has spread the culture of speculation in the U.S. stock and cryptocurrency world.”

Before mid-April this year, the price of bitcoin had surged from $7,000 in 2020 to $65,000, and the rise of various new virtual coins was “out of the earth’s gravity”: dogcoin had once risen 110 times, and shibari coin had once risen 280,000 times.

But on the evening of May 18, the cryptocurrency world suffered a “moment of clarity”. The three major associations of the Internet Finance Association of China, the China Banking Association and the China Payment Clearing Association jointly issued an announcement to alert against the risk of speculation in virtual currency trading.

The People’s Bank of China issued a public announcement on the evening of May 18 from the three major industry associations on preventing the risk of virtual currency speculation

The announcement re-emphasized that virtual currency should not and cannot be used as currency in circulation in the market, and required financial institutions, payment institutions, etc. not to directly or indirectly provide services related to virtual currency, including registration, investment, payment, exchange, etc.; required financial institutions and payment institutions to effectively strengthen the monitoring of virtual currency trading funds; emphasized that virtual currency trading contracts are not protected by law, and the consequences and losses caused by investment transactions are borne by the relevant parties.

These requirements are a reaffirmation of the regulatory provisions. Banking institutions and payment institutions had originally banned transactions related to bitcoin and other virtual currencies, and the three major associations are all self-regulatory organizations, but the information released makes the coin community pay attention: the Internet Finance Association of China and the China Payment Clearing Association are both headed by the People’s Bank of China, and the China Banking Association is headed by the CBRC.

A coin speculator once told the author that it is difficult to regulate over-the-counter transactions in virtual currencies, as long as the words of the names of virtual currencies such as BTC (Bitcoin) and ETH (Ether) do not appear in the remarks, it can be recognized as a transfer remittance between individual users in the view of financial institutions and payment institutions. It remains to be seen whether the regulators will take concrete action after this round of risk warnings.

On the evening of May 19, cryptocurrency circle person Zhang Min (a pseudonym) told the author that after the announcement of the three major associations came out, cryptocurrency circle people are also waiting to see its further impact, “many recent industry activities and forums in the cryptocurrency circle have been temporarily cancelled”.

Second, “Musk is not a god either”

In addition to the tightening signals released by domestic regulation, Musk’s “sudden reversal” is also considered to be one of the triggers of this round of virtual currency plunge, and led to his personal questioning by coin circle believers and other participants.

Tesla is not the first public company to buy coins. Long before Tesla bought coins, the U.S. listed company Microstrategy invested some of the cash in its balance sheet in virtual currencies, but the downfall of Musk, who is ranked second on the Forbes list of the world’s richest people with a personal net worth of $142.6 billion, was more incendiary. “Because he has enough capital to prove his prophecy.” follower Qi Chen (a pseudonym) told the author.

While the impetus for this bitcoin rally has been attributed to the entry of institutional investors, the JPMorgan research note said that the role of institutional investment is exaggerated and that the entry of retail investors is the main driver. Musk is clearly the “opinion leader” among retail investors.

With more than 55 million followers on social media, Musk has a particularly strong appeal among the younger generation of investors around the world. For retail investors, Tesla’s public announcement on Feb. 8 that it had purchased $1.5 billion in bitcoin was seen as a “buy signal. Between the announcement and mid-April, bitcoin rose from near $40,000 to near $65,000. According to outside estimates, the cost of Tesla’s bitcoin position was around $28,000 to $30,000.

But Musk has suddenly “backtracked”. Last week, he publicly stated on social media that he would no longer accept bitcoin payments for cars for the reason that mining is not environmentally friendly. Market sentiment turned negative.

Musk’s unprecedented influence on the cryptocurrency community and inconsistent tweets have shifted the attitude of other cryptocurrency players from “hitchhiking” to “drawing a line under” Musk.

“There is no God among us.” Anthony Pompliano, one of the founders of Morgan Creek Capital, an investment firm that handles digital assets for institutions, took to social media to publicly shout that “celebrities, athletes, musicians, billionaires and entrepreneurs don’t matter as much as we all think they do. The Bit community once welcomed Musk with open arms. But if he continues to do stupid things, he should leave as soon as possible, too.”

In the midst of the crash, “Cathie Wood,” who manages $50 billion in funds, “came to the rescue” at a BusinessWeek forum on May 19, insisting she was long Bitcoin to $500,000. She also said that there is a solution to Musk’s concerns that mining is not environmentally friendly. She suggested that the global mining power is now about 10-20GW, and if we can use the idle 200GW of solar and wind energy and other new energy, we can achieve a green transformation of bitcoin mining. She also hinted that Tesla might be able to play a more important role in the process. Tesla holds Sun City assets under its umbrella, focusing on photovoltaic technology.

At about the same time, the “erratic” Musk once again took to social media to shout that Tesla has “diamond hands”. This is a cryptic cyber code for the cryptocurrency community, suggesting that it will continue to hold positions in the virtual currency. The virtual currency then narrowed its losses.

“But the question is, does anyone know what Musk’s mood will be next week?” Anthony Denier, CEO of trading platform WeBull, said to foreign media, “When fundamentals no longer matter and the market is focused on the whims or comments of one trader, we are entering dangerous territory.”

The novelty and cruelty of the “zoo coin ring”

Musk’s ability to bring in goods in the cryptocurrency world is not limited to bitcoin.

Deng Jie (a pseudonym), a virtual coin buyer, told the author that he bought Dogcoin because Musk had spared no effort to bring goods for Dogcoin, and bought Shiba Inu coin because Musk sent a tweet suspected to be related to Shiba Inu coin.

Dogcoin and Shiba Inu coin are both newly popular virtual coins. Dogcoin was originally invented as a joke to mock virtual coins, while Shiba Inu coin is intended to be the “dogcoin killer”. But these “new buyers” don’t seem to care about the history, original intent, supply and demand, or internal management mechanisms of these created “new coins”.

“I just want to buy a front row ticket to the show.” One new buyer of Shiba Inu coins said, “I often see people in the WeChat group who buy coins and then somehow make money, so I want to give it a try too.” But when asked if he had set up a stop-loss line for himself or how much principal he planned to put in, he said he didn’t have a plan yet.

“On the night of 519, dogcoin and Shiba Inu coin, which were once brought on fire by Musk, both fell by more than 50% at one point. In addition to dog coins and Shiba Inu coins, the market has seen a wide variety of virtual coins such as pig coins, gorilla coins, huskies, and Akita dogs, staging a “zoo” of coins.

Zhang Min expressed concern about the running entry of new leeks: “The market has overplayed the soaring market of dog coins and Shiba Inu coins, stimulating many newbies to enter, which is already very nakedly cutting leeks.” He also said that the risk tips from the three major associations in the financial circle are timely.

Even Wang Shuai, who calls himself a speculator, admits that the “zoo market” is destroying the value judgment of virtual currencies, and it seems that as long as you buy any of the virtual coins, and then have a celebrity with the goods, you can sit back and wait for the price of the coins to skyrocket to get rich, and there are even new issues of “animal coins” that set up ridiculous rules that can only be bought and not sold.

Wang Shuai introduced to the author that the speculative market is trading 24/7 and about 20% of the speculators will do contract trading (leverage). And there have been statistics showing that the average time for a newbie to enter the contract market and lose their capital is 45 days.

Wang Shuai is not as optimistic as he was before about the post-market.

He told the author that the three major associations have jointly issued a voice, and if they really strictly regulate the deposit and withdrawal, it will be a heavy blow to the virtual currency market. In addition, the establishment of virtual currency “mining” enterprise reporting platform in Inner Mongolia and the strict investigation of virtual currency mining around the world may make the market situation worse, “at least for a few months there will not be a big market.”

Posted by:CoinYuppie,Reprinted with attribution to:
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