Cryptocurrency update: Bitcoin on the rebound?
Bitcoin makes some big strides in trading today. Are we looking at a BTC bounce back?
Bitcoin gains 35%, starts week in the green
What a torrid couple of weeks it’s been for Bitcoin. The world’s most popular cryptocurrency has been battered recently, with prices falling below $30,000 for the first time since last year.
Now, it looks like BTC is preparing to bounce back. As of Monday, the crypto had gained 35% in early trading, reaching over $39,000. This was the first time Bitcoin had breached that level since June 16th – but still some $26,000 off the currency’s all-time highs.
At the time of writing, Bitcoin had retreated to around $38,355.
Datamish data shows a short squeeze appears to have driven prices higher in the short-term. Those taking short positions have apparently had to sell as price action turned positive. Why is currently unknown.
Datamish is an independent service that tracks Bitcoin long and short positions.
One of the key reasons why Bitcoin may have rekindled its fighting spirit is the news Amazon is planning to accept BTC as payment, potentially by the end of 2021.
According to reports from City A.M., the online retail colossus is exploring how cryptos can be fully integrated into the Amazon ecosystem. Bitcoin would be the launch point, with Ethereum, Cardona and Bitcoin Cash potentially being acceptable payment for Amazon transactions going forward.
Either way, the bulls will be happy with this price action – but let’s not get too hasty. This is cryptocurrency after all. We’ve seen volatility that would sink any other asset become normal in the world of crypto trading. Anything can change at any minute.
While the outlook is currently good, there are some global stories and opinions that could knock BTC off its current upward course.
Bitcoin mogul suggests Chinese crypto trading could soon be a thing of the past
According to Bobby Lee, one of China’s first Bitcoin trading pioneers, cryptocurrencies could face an outright trading ban if the Chinese crypto crackdown intensifies.
Lee, the former owner of BTC China, the nation’s first Bitcoin exchange, is speaking from experience. He was forced to sell BTC China in 2017 following the first of the Chinese government’s crypto clampdowns.
Chinese authorities have been ruthless in their pursuit of crypto market regulation in 2021. So far, we’ve seen outright bans on crypto mining within China, and tougher restrictions on retail trading and institutional banking services.
According to Lee, the next logical step for China’s government to take is an outright ban on crypto trading.
“The next thing they could do, the final straw, would be something like banning cryptocurrency altogether,” Lee said in an interview with Fortune. “I put it at the odds of 50-50.”
Lee did not mention how this would be enforced from a practical standpoint.
China’s authoritarian stance on crypto trading has been the catalyst for BTC prices crashes in 2021. When China announced its mining ban back in May, Bitcoin prices were in free fall. While this has opened up mining operations in other countries, China was responsible for the vast bulk of BTC token mining.
The global hash rate, the rate at which new BTC tokens are created, as fallen dramatically since the ban.
Will Lee’s prediction ring true? It’s hard to say. Control is the Chinese government’s modus operandi. There are many exchanges, including Binance, still operational in Chinese jurisdictions. If the nation is really serious about clamping down on crypto trading, these could fall next.
Keep an eye on China. Its actions will likely define BTC price movements going forward.
Man Group chief likens cryptocurrency trading to Dutch tulip bubble
Luke Ellis of Man Group has claimed that cryptocurrencies hold “no inherent worth’, comparing the current situation to the 17th Dutch tulip bubble.
Man Group is the world’s largest listed hedge fund, controlling assets worth $127bn for clients worldwide.
According to Ellis, cryptocurrencies are mainly popular with traders because of their price swings, rather than any practical application. Much of the actual trading is done by market participants who doubt crypto’s ultimate utility.
“If you look at cryptocurrencies as a whole, it is a pure trading instrument. There is no inherent worth in it whatsoever. It is a tulip bulb,” Ellis said. Ellis also described crypto tokens as “things to trade because they go up and down a bunch”.
Tulip bulb refers to the Dutch tulip trading bubble. In the 17th century, prices of tulip flowers skyrocketed before massively collapsing, leaving hundreds of tulip traders and speculators bankrupt.
Could the same be happening with cryptos?
We’ve seen similar rhetoric from a number of institutional sources recently. Governor Andrew Bailey of the Bank of England, for instance, has warned cryptocurrency traders may stand to lose all their money due to the product’s inherent volatility.
But some tokens have an actual practical use. Ether is used as payments for transactions on the Ethereum blockchain. The Ethereum blockchain is rapidly expanding in scope and is thought to be the leading network for the decentralised finance sector. We’ve also seen the rise of non-fungible tokens (NFTs); artworks and media held digitally and bought exclusively with cryptocurrencies.
Bitcoin, however, may have gained too much value to be used as an actual means of exchange. But when you have countries like El Salvador enshrining it as legal tender, it may still yet serve a purpose beyond simply being a tradeable project.
Digital currency is such a young asset that bubbles may likely occur during these development stages. However, this just requires extra vigilance on the part of traders and investors. Volatility is never far away – and all bubbles have to burst eventually.