“I was still talking and laughing the first hour, and the next second I was stunned.” At about 10 pm on May 19th, Beijing time, Wang Shuai (a pseudonym), an investor in the currency circle, told the author.
As night fell, the rapid decline of virtual currencies shocked the entire currency circle. Among them, Bitcoin fell by about 34% from the high point of the day, once fell to 29,000 US dollars; Ethereum (ETH) was once cut; other newly popular currencies such as Dogecoin and Shiba Inu coins also fell by 56% and respectively. 64%.
“This big drop is also ranked in the top ten in history.” Wang Shuai, who had been exposed to Bitcoin 8 years ago and had experienced many ups and downs, told the author that during the slump on the evening of May 19, he said The book value of the virtual currency held plummeted by nearly 500,000 yuan, leaving only more than 1 million yuan. He did not disclose the cost price of the currency.
Compared with the heartbeat of the “old cannons in the currency circle”, the “Fright Night” of the new leeks is even more painful to the skin.
According to data from the market data platform “Coin”, as of 7:30 am on May 20, the total liquidation in the past 24 hours has reached 6.91 billion US dollars (approximately 44.4 billion yuan), and about 580,000 people have liquidated their positions.
The reason for the liquidation is that the contract leverage trading provided by the currency speculation platform is used more. Whenever the market declines rapidly, investors will face forced liquidation on the trading platform if it is too late to make up the margin. Hundreds of thousands of liquidation means that more speculators have recently used a higher multiple of leverage in their transactions, which reflects the blind optimism of buyers on the later market.
Although three hours later, Bitcoin and other virtual currency markets seem to gradually “recover lost ground” and Bitcoin has returned to the vicinity of $40,000, but the wealth that has been wiped out by the liquidators can never be returned.
1. The currency circle encounters a “sober moment” of supervision
In the past year, the prevalence of speculation has led to a surge in virtual currency varieties and trading volume. In overseas markets, Elon Musk, the world’s second richest man, allowed Tesla to accept Bitcoin to buy cars, and the legendary investor Paul Tudor Jones proposed a way to buy virtual currencies to fight inflation. All attract more people to run into the virtual currency market in 2020.
“Part of the cash issued by the US government for bailout during the epidemic has flowed into a zero-commission trading platform.” A US stocks analyst told the author, “The new trading platform has a more convenient trading interface that allows stocks and coins to play games. Globalization and the trend of working from home caused by the epidemic have also made online community speech more influential. The wealth effect has kept more people involved, and everyone seems to have become day traders. It has also given rise to speculation in the U.S. stocks and currency circles. spread.”
Before mid-April this year, the price of Bitcoin had soared from USD 7,000 in 2020 to USD 65,000, and the rise of various new virtual currencies was “out of the gravity of the earth”: Dogecoin once rose by 110 times. The Shiba coin once rose 280,000 times.
But on the evening of May 18, the currency circle encountered a “sober moment”. The China Internet Finance Association, China Banking Association, and China Payment and Clearing Association jointly issued an announcement to remind them to prevent the risk of virtual currency transaction speculation.
The announcement again emphasizes that virtual currency should not and cannot be used as currency in the market, and requires financial institutions, payment institutions, etc. not to directly or indirectly provide virtual currency-related services, including registration, investment, payment, exchange, etc.; require finance Institutions and payment institutions effectively strengthen the monitoring of virtual currency transaction funds; emphasizing that virtual currency transaction contracts are not protected by law, and the consequences and losses caused by investment transactions shall be borne by the relevant parties themselves.
These requirements are a reiteration of regulatory requirements. Banking institutions and payment institutions have already banned transactions involving Bitcoin and other virtual currencies. The three major associations are also self-regulatory organizations, but the information released makes the currency circle have to pay attention: China Internet Finance Association and China Payment and Clearing Association both It is supervised by the People’s Bank of China, and the China Banking Association is supervised by the China Banking and Insurance Regulatory Commission.
Some speculators once told the author that it is difficult to supervise the over-the-counter transactions of virtual currencies, as long as the names of virtual currencies such as BTC (Bitcoin) and ETH (Ethereum) should not appear in the remarks, in financial institutions and payment institutions It seems that it can be regarded as a transfer and remittance between individual users. It remains to be seen whether the regulatory authorities will take specific actions after this round of risk warnings.
On the evening of May 19th, Zhang Min (a pseudonym) from the currency circle told the author that after the announcements of the three major associations, people in the currency circle are also waiting to see its further impact. “Recently, many industry events and forums in the currency circle have been temporarily cancelled. Up”.
2. “Musk is not a god either”
In addition to the release of domestic regulatory tightening signals, Musk’s “sudden reversal” is also considered to be one of the incentives for this round of virtual currency plummet, and caused him to be personally questioned by believers in the currency circle and other participants.
Tesla is not the first public company to buy coins. Long before Tesla bought the currency, the US listed company Microstrategy invested part of the cash on the balance sheet in virtual currencies, but with a personal net worth of US$142.6 billion, it ranked second in the Forbes global rich list. Musk’s end zone Goods, more provocative. “Because he has enough capital to prove his prophecy.” Follower Chen Qi (pseudonym) told the author.
Although the momentum of this round of Bitcoin’s rise is considered to be the entry of institutional investors, the JPMorgan Chase research report stated that the role of institutional investment has been exaggerated and the entry of retail investors is the main driving force. Musk is clearly the “opinion leader” among retail investors.
On social media, Musk has more than 55 million followers, especially among the younger generation of investors around the world. For retail investors, Tesla publicly announced on February 8 that it had purchased $1.5 billion in Bitcoin, which was regarded as a “buy signal.” From the announcement to mid-April, Bitcoin rose from around $40,000 to around $65,000. According to outside estimates, Tesla’s bitcoin cost price for opening a position is around US$28-30,000.
But Musk suddenly “turned back”. Last week, he publicly stated on social media that he would no longer accept Bitcoin as a payment for car purchases due to unenvironmental mining. Market sentiment turned negative.
Musk’s unprecedented influence on the currency circle and inconsistent tweets have changed the attitude of other currency circle participants toward Musk from “hitching a ride” to “drawing a line.”
“There is no god among us.” Anthony Pompliano, one of the founders of Morgan Creek, an investment company that manages digital assets for institutions, advertised publicly on social media, “Celebrities, athletes, The importance of musicians, billionaires and entrepreneurs is not as important as we all think. The Bit community once welcomed Musk with open arms. But if he continues to do stupid things, he should leave as soon as possible.”
In the crash, Cathie Wood, who manages $50 billion in funds, “come out to rescue the market” at the Business Week forum held on May 19th, insisting on bullish Bitcoin rising to $500,000. She also said that there are solutions for Musk’s concerns about mining that is not environmentally friendly. She proposed that the current global mining power is about 10-20GW, and if the idle 200GW of solar and wind energy can be used, the green transformation of Bitcoin mining can be realized. She also hinted that Tesla may play a more important role in this process. Tesla owns Sun City assets and focuses on photovoltaic technology.
Almost at the same time, the “capricious” Musk once again advertised on social media that Tesla had “diamond hands.” This is a cryptocurrency network code, which implies that it will continue to hold virtual currency positions. The decline of virtual currencies subsequently narrowed.
“The problem is, no one knows what Musk’s mood will be next week?” Anthony Denier, CEO of the trading platform WeBull, said to foreign media. “When the fundamentals are no longer important, the market only focuses on the whims of a businessman. Or when we comment, we enter a dangerous field.”
3. The novelty and cruelty in the “zoo currency circle”
Musk’s ability to carry goods in the currency circle is not limited to Bitcoin.
Virtual currency buyer Deng Jie (pseudonym) told the author that the reason why he bought Dogecoin was because Musk spared no effort to bring goods for Dogecoin, and he bought Shiba Inucoin because Musk sent one. Suspected of tweets related to Shiba Inu Coins.
Both Dogecoin and Shiba Doge are newly popular virtual currencies. Dogecoin was invented as a joke for mocking virtual currency, Shiba Inucoin was to become a “Dogecoin killer”. But these “new buyers” don’t seem to care about the history, original intention, supply-demand relationship or internal management mechanisms of these “new currencies” created.
“I just want to buy a ticket to the front row.” A new purchaser of Shiba Coins said, “We often see people in WeChat groups who buy coins and then somehow make money. I also want to give it a try. “But when asked whether he would set a stop-loss line for himself or how much he planned to invest in principal, he said he has no plan yet.
On the day of “519 Fright Night”, the Dogecoins and Shiba Inu coins that had been ignited by Musk once fell by more than 50%. In addition to Dogecoins and Shiba Inu coins, a wide variety of virtual coins such as pig coins, orangutans, huskies, and Akita dogs have appeared on the market, staged a “zoo” market in the currency circle.
Zhang Min expressed concern about the running admission of the new leek: “The market has too much exaggerated the rise of Dogecoin and Shiba Inu coins, which has stimulated many novice Xiaobai to enter the market. This is already very naked to cut leek.” He also Said that the risk warnings of the three major financial associations are timely.
Even Wang Shuai, who claims to be a speculator, admits that the “zoo market” is destroying the value judgment of virtual currency. It seems that as long as you buy any virtual currency and a celebrity brings the goods, you can wait for the currency price to skyrocket to achieve wealth, and even new ones. The issued “animal coins” set up ridiculous rules and can only be bought but not sold.
Wang Shuai introduced to the author that in the currency speculation market 7×24 hours of uninterrupted trading, about 20% of speculators would do contract transactions (with leverage). According to statistics, the average time for a novice to enter the contract market to lose principal is 45 days.
For the market outlook, Wang Shuai is not as optimistic as before.
He told the author that the three major associations have jointly voiced that if the withdrawal and deposit of funds are really strictly regulated, it will be a blow to the virtual currency market. In addition, the establishment of a reporting platform for virtual currency “mining” companies in Inner Mongolia, and strict investigations of virtual currency mining in various places may make the market worse. “At least there will be no big market in a few months.”
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.