Cryptocurrency update: Bitcoin and the search for $50,000

Bitcoin’s downward stagger continues. Forget talk of $100,000. Let’s focus on breaking $50,000 again by the end of the year.

Cryptocurrency update

Bitcoin struggles to break $50,000

Bitcoin’s torrid time continues. Up until very recently, we were discussing whether Bitcoin could break $100,000. Now, it’ll be lucky to crack over $50,000 in the coming weeks.

Despite getting a bump on the Federal Reserve’s tapering and rate hike news on Wednesday, Bitcoin continues to trend downwards.

Bitcoin lost 2.5% on Thursday following a 1% upward bump on Wednesday. At the time of writing on Friday 17^th December, the token was still in the red, trading a further 2% lower. BTC is now trading for around the $47,236 mark.

So much for a relief rally. Bitcoin did reach above $49,000 briefly on Wednesday but looks unlikely to recapture the fighting spirit that saw it climb to all-time highs in November. The token is currently about 30% away from those levels.

Other coins are faring poorly too. Looking at charts throws back a see of red and negative numbers.

Ethereum, the world’s second most popular token by market cap, is down 3.9% on the day. ETH is currently trading for around $3,875 level – roughly $1,000 off its all-time high. Even so, Ethereum is still up several hundred percent year-on-year but appears to be struggling at the moment.

We’ve often said it, but Bitcoin is a market bellwether. The general trend is such that when Bitcoin underperforms, the wider cryptocurrency market underperforms with it. That’s what we’re seeing today. So much for a fairy-tale ending to 2021 for Bitcoin.

What we have been seeing more of in recent weeks is the performance of Bitcoin and digital tokens against stock markets. The current downward swing in BTC prices is partially linked to Wall Street. After some of Europe’s central banks announced their plans to combat inflation, the S&P500 and Nasdaq dropped – 2% in the cast of the Nasdaq – which in turn caused a general sinking of crypto prices.

Will institutions bypass Bitcoin in the future?

While some are hoping Bitcoin will cross the $100,000 Rubicon, others are looking at decentralised finance (DeFi) from a more practical perspective. In this context, some businesses and organisations may look to forgo BTC investment in lieu of more developed blockchain tokens.

Clayton Gardner, CEO of cryptocurrency investment management firm Titan, believes firms will look to invest in currencies and blockchains that feature smart contracts.

Bitcoin has never really been associated with smart contracts. For context, a smart contract is an agreement between two parties programmed into blockchains. When the conditions between the two parties are met, the program is run and executed.

A big network upgrade occurred in mid-November giving Bitcoin this functionality. However, other blockchains, like Ethereum’s, were designed from the ground up with smart contracts in mind. As such, they are more developed and may be institutions preferred choice as the world moves towards mass crypto adoption.

“Bitcoin was originally seen as a macro speculative asset by many funds and for many it still is,” Gardner said. “If anything solidifies its use case, it’s a store of value. It’s not really used as originally intended, perhaps from a medium of exchange perspective.”

Gardner added: “Bitcoin is still one of the most secure blockchains, but I think layer-one, layer-two blockchains beyond Bitcoin, will handle the majority of transactions and activities from NFT (nonfungible tokens) to DeFi.

“So, I think institutions see that and insofar as they want to put capital to work in the coming months, I think that could be where they just pump the capital.”

Crypto rug pull scams see investors lose $2.8bn across 2021

A report from Chainanalysis, as reported by Coindesk, cryptocurrency investors lost $2.8bn in rug pull scams this year.

A rug pull scam in the crypto world essentially involves scam artists doing seemingly legitimate work on blockchain networks. They will then issue a coin on decentralised exchanges. Victims will then pick up the tokens in the hope that they will appreciate in the usual manner. During this time, liquidity pools can run into the tens of millions of dollars.

Once the pool is large enough, the rug is pulled out from investors feet. The scammers will pull all liquidity out of the pools and remove their token from any exchanges, pocketing the cash.

Rug pulls represent 37% of all illicit crypto-generated revenues generated in 2021. A total of $7.7bn was created by illegal or illicit means this year. Worryingly, rug pulls only accounted for 1% of the total created in 2020. Scammers are getting smarter.

We are still seemingly in the Wild West when it comes to crypto. Such an increase in scams of this nature really strengthens the case for careful regulation. It also backs up some commentators’ fears that investors will lose their money, either through being scammed or general naivety over what crypto investment actually entails.

Keep safe and only invest or trade crypto from trusted sources. If something looks too good to be true, it usually is.