A number of virtual currencies have experienced a cliff-like plunge again today. On August 5, Beijing Business Daily reporters noticed that Bitcoin fell below $50,000 again, a sharp drop of 15% today. As of 21:20 Beijing time, the latest price of Bitcoin was $49,835.5.
Ethereum's downward trend is even more fierce. Beijing Business Daily reporters noticed that, in line with Bitcoin, Ethereum fell below $2,800, $2,600, and $2,400 in succession, reaching a minimum of $2,200. As of 11:05 on August 5, the latest price of Ethereum was $2,305, a daily drop of 20.87%, a weekly drop of 29.79%, and a monthly drop of 25.7%.
Other currencies have not escaped from it either. Among them, the latest price of SOL is $128.5, down 11.66% in 24 hours, 31.26% in the week, and 4.16% in the month. The latest price of Dogecoin is $0.09, down 16.06% in 24 hours, 29.77% in the week, and 16.19% in the month.
The plunge was driven by multiple factors. As many analysts mentioned in an interview with Beijing Business Daily, changes in market expectations are an important factor leading to Bitcoin price fluctuations. On the one hand, the decline in global stock markets and the rise in risk aversion have put pressure on Bitcoin. Even the interest rate cut has failed to boost market confidence, but has further exacerbated market uncertainty. On the other hand, the movement of market funds has also had a significant impact on Bitcoin prices. As prices have fallen and triggered a series of chain liquidations, prices have fallen rapidly.
Along with the plunge, there are also the continued intensification of currency circle liquidations. According to CoinGlass data, at 9:38 on August 5, a total of 200,097 people were liquidated in the last 24 hours, with a total amount of $766 million. It is worth mentioning that the liquidation situation continues to intensify with price changes. At 11:16 on August 5, a total of 211,682 people were liquidated in the last 24 hours, with a total amount of $820 million. Judging from the liquidation situation, the loss-making crowd is more bullish on the market.
It should be noted that high-risk leveraged contract operations themselves have multiple risks. The so-called contract trading is actually a mode of forward trading of trading products. Investors can obtain the income generated by the rise and fall of the "target" price through buying long or selling short contract transactions.
For example, when bullish on Bitcoin and going long, price increases will bring profits, and falling prices will bring losses; on the contrary, when bearish on Bitcoin and going short, price increases will bring losses, and falling prices will bring profits.
Regarding the leveraged contract operation, Yu Jianing, co-chairman of the Blockchain Committee of the China Communications Industry Association and honorary chairman of the Hong Kong Blockchain Association, told the Beijing Business Daily reporter that this operation further amplified the market's volatility risk. The use of leverage means that investors can control larger positions with less capital, which increases potential gains but also amplifies potential losses. When market prices fluctuate in an unfavorable direction, investors' losses will multiply, and may eventually lead to a liquidation.
As early as 2020, many departments including the People's Bank of China have issued documents to warn of the risks of virtual currency trading platforms, pointing out the common routines of virtual currency trading platforms, that is, first defrauding customers into entering the market through false transactions, and then forcing customers to liquidate their positions by manipulating market prices and malicious downtime. In addition, virtual currencies are also mostly used for speculation, which poses a potential risk to financial security and social stability, and has become a payment tool for illegal economic activities such as money laundering.
Yu Jianing pointed out that digital assets are high-risk investment assets. The fluctuation range and speed of asset prices are significantly different from traditional assets. The equity mechanism and technical support behind them are significantly different from traditional investment assets. Participants in the digital asset market must not borrow money for investment, nor use high leverage. It is not recommended to invest in a "all-in" manner, and it is not recommended to use working capital from life or business for investment, otherwise it may cause extremely serious consequences.
"Before entering the digital asset market, investors should conduct sufficient knowledge reserves and risk assessments to avoid making emotional investment decisions due to short-term market fluctuations and remain calm and rational. Establishing a scientific risk management system is also an important means to protect the interests of investors. Set reasonable stop-loss points and profit-loss ratios, regularly evaluate the risk status of the investment portfolio, and adjust investment strategies in a timely manner according to market changes." Yu Jianing said.
What needs to be clarified is that in my country, there are still strict restrictions on the use and trading of encrypted digital assets. Industry insiders remind that in the future, regulators may intensify their crackdowns on illegal market transactions. Virtual assets are high-risk assets, and any investor should be aware of the risks. Yu Jianing further reminds investors to be alert to several major issues. The first is the uncertainty of the regulatory environment. The regulatory policies of countries around the world on digital assets are constantly changing, and new regulatory measures may have a significant impact on the market, causing sharp price fluctuations. Secondly, the risk of market manipulation is also an issue that cannot be ignored. The digital asset market is susceptible to manipulation by large and institutional investors. Large-scale buying or selling may cause sharp fluctuations in market prices, and ordinary investors are easily affected.
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