MOSCOW (Pakistan Point News / Sputnik - 21st May, 2021) The recent plunge in the price of bitcoin, which has been blamed on China's new curbs on cryptocurrency trading and comments by Tesla CEO Elon Musk, was expected by investors after a three-year bull run, Nessim-Sariel Gaon, a founding partner at Swiss-based private equity firm LIAN Group, told Sputnik in an interview.
Bitcoin's price stabilized on Thursday at just over the $40,000 mark, one day after the digital Currency fell to as low as $30,000 in a wild day of trading. Other major cryptocurrencies also suffered heavy losses, as rival ethereum sank 40% in less than 24 hours after months of steady gains.
In mid-April, bitcoin hit a record high of $64,829, but Gaon said that many investors had been waiting for a major price correction long before this week's crash.
"For me, I don't see this as a downturn. We are looking at a consolidation of the market. We were expecting and waiting for such a correction," Gaon said.
The LIAN Group partner cited previous price crashes in 2017 and 2018, adding that institutional traders have since taken greater control over cryptocurrency markets, bringing stability that can provide insulation from major shocks.
"If you look at 2017, before the bull run, we had a couple of 30%, 40% corrections, before it was went up. We saw how the market fought back ... so that shows the strength of the market, and today we are speaking about a much more institutionalized market than four years ago," he stated.
Bitcoin's price soared this February after Elon Musk said that Tesla had purchased roughly $1.5 billion of the digital currency.
Three months later, Musk's announcement that Tesla would stop accepting bitcoin as payment for the company's electric vehicles, over concerns about the carbon emissions caused by cryptocurrency mining, triggered a major sell-off.
Tweets by the Tesla CEO have also led to swings in the price of dogecoin, a meme-based altcoin, and Gaon said that Musk's apparent sway over cryptocurrency prices was, in part, the result of the media coverage he receives.
"When you are getting three pop-up [notifications] at the same time from three different media platforms saying 'Elon Musk is banning crypto from Tesla,' just from the way most of those media are phrasing it, it helps the entire wave to a sell off," the LIAN Group founding partner said.
Musk may continue to influence digital and traditional stock markets for many years to come, Gaon added � noting, however, that the price swings brought about by the Tesla CEO's comments may be less severe as institutional traders gain a greater market share from their retail counterparts.
The recent fall in the price of bitcoin and other digital currencies has also been blamed on the Chinese government's decision on Tuesday to ban financial institutions and payment firms from providing services linked to cryptocurrencies.
According to Gaon, concerns over the environmental impact of cryptocurrency mining may have also played a role in China's decision to get tough on digital currencies.
"China has a 2050 plan on carbon emissions that President Xi is very much pushing forward in order to make China a carbon neutral country. Obviously, mining on fossil energy sources is a challenge and a concern, and I definitely think that China is taking this seriously," the LIAN Group founding partner said.
Bitcoin mining, which requires powerful computers to carry out complex mathematical calculations, consumes more electricity annually than countries such as Argentina and the Netherlands, according to a February study by researchers at the UK's University of Cambridge. More than half the world's bitcoin mining is done in China.
The Crypto Climate Accord initiative has been launched by industry leaders as an attempt to decarbonize the mining process through the use of electricity derived entirely from renewable sources.
