What is cryptocurrency and why did the market drop?

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Some cryptocurrencies recently saw their biggest drop in years.

SEATTLE — Digital currencies are a form of payment. You can use them in exchange for goods and services. 

Cryptocurrencies work using a technology called “Blockchain.” It’s essentially a very secure and permanent leger of all cryptocurrency transactions. It’s able to connect computers from all around the world.

Some of the more common cryptocurrencies are Bitcoin, Ethereum and Dogecoin. 

These digital currencies have skyrocketed in popularity over the past few years. However, in just the last week, something big happened in the crypto world. All the markets experienced a massive drop. For some cryptocurrencies, it was the biggest drop they’d seen in years.

The massive decline came after Tesla reversed course and said it would no longer allow you to buy a Tesla vehicle using Bitcoin. China’s move toward cracking down on cryptocurrency use in the country also contributed to the drop that’s now being dubbed “The Great Crypto Crash of 2021.” A total of $1 trillion was wiped out from the market in just one week.

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Experts blame the market’s erratic movement on it being so new. Scott Smallman, managing director of Wedbush Securities, says there just aren’t as many players.

“The markets don’t have the level of depth that they that they might have for, you know, Starbucks stock or something like that,” he said.

Experts also point to amateurs investing in cryptocurrency with money they don’t have. 

They’re also owned by people who usually keep a close eye on the market. When the future looks uncertain, investors can quickly pull their money out. That’s also known as panic selling. This can help exacerbate gains or losses on the crypto market.

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