What happened?
On 18 May, China prohibited its financial institutions from providing cryptocurrency-related services. Earlier this month, on 13 May, Elon Musk stated, that Tesla will stop accepting bitcoin as payment. He tweeted: "We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea... but this cannot come at great cost to the environment."

The same day, the US officials revealed that it was investigating Binance, as the world's largest cryptocurrency exchange, for tax fraud and money laundering.

What is the background?
First, the remarkable rise of cryptocurrencies. Since the release of bitcoin in 2009, cryptocurrencies have evolved into the market, which is now worth trillions of dollars. The exchange CoinMarketCap estimates the total value of the cryptocurrency market at USD 1.58 trillion. Part of the reason for the rise is the perception that cryptocurrencies are indeed currencies of the future. The blockchain technology on which it is based places emphasis on decentralization and privacy features that appeal to consumers wary of government interference and monitoring of the market.

Second, the lack of maturity of the market. This is evident by the influence that a few individuals have on it. Despite its huge market cap, the fact remains that the cryptocurrency market is only just over a decade old. Unlike conventional stock, the art of investing in the cryptocurrency market is something that most people are still trying to understand, which would explain them relying on what certain influential voices have to say. A case in point is Musk, who managed to single-handedly drive up the value of the crypto DogeCoin by a factor of thousands, relentlessly promoting it on social media. Musk had also contributed to the rapid rise of Bitcoin by revealing that Tesla had bought billions of dollars' worth of the crypto and has now contributed to its crash.

Third, the antagonistic attitude of the State against cryptocurrencies. Chinese and US officials' stances this week are just the latest in a long line of antagonistic measures that world governments have taken against cryptocurrencies. These governments are motivated by multiple factors. Prime among them is that the decentralized nature of cryptocurrencies takes control away from their hands. The emphasis on privacy also makes it difficult to monitor, as evidenced by hacker groups these days, demanding their ransom in Bitcoin.

Fourth, the rise of "memecoins" giving cryptocurrencies a bad name. While the lack of regulation adds to the appeal of the cryptocurrency markets for many, the fact that anyone can float and promote their own currencies has led to buyers being victims of scams. Many experts point to the rise of memecoins like Doge as a potential red flag. Unlike before Cryptocurrencies like Bitcoin and Etherium, where the users are either investing in a real-world use or a potential application, memecoins have no intrinsic value apart from the fact that others too are buying it on the hype. Many point out that this is essentially a pyramid scheme — a crash is inevitable the day the hype stops and the early investors will make a profit at the cost of later investors.

What does it mean?
The recent volatility and the rise of coins with virtually no value have led experts to ponder whether a cryptocurrency will ever replace conventional currency. Stability is one of the most important hallmarks of a currency, and cryptocurrencies have so far lacked that. The crash has also raised questions about whether the rapid rise of cryptocurrencies in recent years has been a bubble that has now burst.