Cryptocurrency update: Bitcoin struggles to make ground

Another testing week for Bitcoin as it looks to recover after falling to a 6-month low on Monday.

Cryptocurrency update

Bitcoin erases weekly gains

Bitcoin is struggling to regain momentum after a slight midweek reversal of fortunes.

At the time of writing, BTC was down 1% on the day, trading for around $42,528, after falling 3.06% at the end of the previous session.

The world’s most popular token has had a tough week. On Monday, it dropped below $40,000, reaching a 6-month low. It’s hardly off to a roaring start. Indeed, last week, the token had reached a 3-month low before losses were extended.

That said, the value of a BTC token is over double what it was at the start of 2021, so that’s some progress.

There’s been plenty of market chatter and influence behind this latest period of woe for BTC.

First up, we’ve had comments from major organisations regarding cryptocurrency’s safety and validity within global financial systems.

The IMF, for example, has raised concerns over the interconnectivity of digital finance and financial markets. Crypto performance being tied to equities can allow market shocks, as we’re currently seeing, which could be a destabilising influence on markets worldwide.

With these concerns, the IMF has aligned itself with the Bank of England. The UK’s central bank warned in 2021 that cryptocurrency and decentralised finance could prove harmful to global economic stability.

It seems a bit obvious. The entire point of decentralised finance (DeFi), of which cryptos are a major part, is to disrupt traditional finance. But not everyone is on board with crypto, not just institutions and organisations, but the everyman on the street. The actions of the few could have a major negative impact on everyone’s economic health, hence where the concerns of the IMF, BoE, and others coming into play.

There is also the US tech stocks crunch. Since Fed Chair Jerome Powell announced tightening of the US fiscal policy, yields rose, and tech stocks shrank. With the Nasdaq dropping, BTC and other tokens were fell alongside.

Where now for Bitcoin? Fears of falling back through $41,000 are evident. The $40,000 support floor is looking creaky right now.

The Bitcoin Fear & Greed index is still firmly in the red, representing extreme fear.

But is Bitcoin worth more than 500 barrels of oil?

Bitcoin champion and price predictor Mike McGlone has recently put the token ahead of commodities like oil and copper in terms of investment.

McGlone, who is a Senior Commodity Strategist at Bloomberg, has said supply and demand is likely to push Bitcoin onwards, in a similar way to commodities – only with some key differences.

According to McGlone, prices for WTI crude oil are down about 20% over the past year thanks to changes in oil’s worldwide supply/demand balance. In 2012, demand outstripped supply by 6 million barrels per day in North America. As of 2022, there is now a 3 million a day surplus. McGlone says this change was driven by the fact oil can now be extracted for less money.

Headwinds generated by slowing Chinese demand has affected copper prices too, McGlone said.

So, what about Bitcoin? What’s different about BTC, according to McGlone, is the top cryptocurrency by market cap comes with a “lack of supply elasticity.”

Because the pace of new Bitcoin token production is already set by the underlying blockchain’s programming, a higher price won’t automatically lead to more supply.

According to McGlone’s calculations, one BTC is now worth more than 500 barrels of oil, up from “a mere fraction” of what a barrel of oil was worth in 2012.

“Supply, demand, adoption and advancing technology point to the crypto continuing to outperform fossil fuel in the next 10 years,” McGlone wrote.

Dogecoin surges with Tesla bump

The little coin that could, Dogecoin, continues its trajectory out of the meme world and into legitimacy this week.

Dogecoin has gained 11% on the news that Tesla will now start accepting the token as payment.

Note that payments aren’t for full Tesla vehicles just yet. Dogecoin can be used to buy Tesla merch, so if you do want a Model X and you’ve got a major Dogecoin stash, you might consider cashing in. Otherwise, you could pick up a Tesla belt buckle or a Cybertruck-shaped Cyberwhistle.

Dogecoin is a funny thing. It literally started as a joke and a way of mocking Bitcoin. As of now, the token has become the 11th most popular coin in the world by volume. Its market cap sits at $24bn.

Earlier in the year, Tesla piloted accepting Bitcoin for car payments. The pilot was dropped after Tesla revealed concerns over Bitcoin’s major energy use.