Bitcoin Stalls As US, China Tackle Cryptocurrencies

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The governments of the world’s two largest economies have taken on bitcoin and the cryptocurrency market directly. In the United States, agencies like the Securities and Exchange Commission have promised a crackdown on the industry. The Treasury Department is preparing a report on digital stable currencies that tout dollar-pegged values ​​and worry about their potential to cause trouble in crypto and traditional markets. And powerful US Senator Elizabeth Warren (D., Mass.) Has become a vocal critic of cryptocurrencies in Congress.

China has gone further. The country has banned bitcoin and cryptocurrencies. Bitcoin miners, ”companies primarily located in China that mine the computers that actually run the network, have been forced to leave the country. .

All of this had an effect on the price of bitcoin. At the start of the third quarter, the digital currency continued a decline that began after its price peaked at a record high of $ 63,381 set on April 15.

In mid-July, with a price below $ 31,000, bitcoin started to recover. Gains are locked in and bitcoin, at around $ 41,000, is up about 17% for the quarter.

However, regulatory pressure prevented the rally from going any further. Bitcoin at one point regained the $ 50,000 level, only to give way when China imposed its ban.

So, at current levels, bitcoin remains about a third below the April record.

It’s probably one of the most fascinating 90-day spells we’ve had, ”said Bill Barhydt, co-founder and CEO of Abra, a crypto-trading services company.

Other cryptos also had a mixed quarter. Ether, the native currency of the Ethereum network, rose about 24% in the quarter, to $ 2,820. But it’s down about 29% from the quarter’s high of $ 3,952 set on September 5. Meanwhile, dogecoin, a favorite with memes traders, fell from 25 cents on June 30 to 20 cents on September 29.

Regulatory pressure has dampened momentum in other ways as well. The number of daily transactions on the bitcoin network has fallen into a range of around 175,000 to 200,000. This roughly equates to bitcoin bear market levels in 2018 and well exceeds 300,000 earlier in the year, according to data from research firm Glassnode.

While regulatory crackdown is an immediate factor affecting prices, the quarterly action also appeared to be part of bitcoin’s distinct boom-bust cycles. In 2013, the price of bitcoin rose to around $ 1,100, then plunged 87% through 2016. In 2017, the price jumped to nearly $ 20,000, then fell 84% over the course of the year. ‘Next year.

It looks like the cycle is repeating itself again, said Lukas Enzersdorfer-Konrad, product manager at European crypto broker Bitpanda.

What drives these phases in crypto, he said, is the adoption rate. The momentum phase attracts new people. This drives up the price, which ends up overheating the small market. This leads to a “cool off” phase as the market and industry absorb the new growth.

The market seems to have come out of a phase of momentum and back into an accumulation phase, ”said Mr. Enzersdorfer-Konrad. If so, bitcoin could last for up to another year of this type of distance trading.

Other parts of the crypto market had a little more life during the quarter, only to collapse in late September.

The total amount of money in the so-called DeFi sector, a collection of banking-type financial services linked to cryptocurrencies, has fallen to around $ 81 billion, from a record high of $ 97 billion in early September, according to the DeFi Pulse website.

Sales of NFTs, or non-fungible tokens, also increased and decreased during the quarter. These are unique bitcoin-like digital tokens that often represent digital artwork or other real-world assets.

NFT’s sales peaked on Aug. 29 of around $ 267 million, according to data site NonFungible.com. This is only $ 2.4 million as of June 30. However, sales in September fell sharply. On September 27, sales totaled $ 18 million.

One group of investors remains optimistic: venture capitalists. Crypto companies raised a record $ 7.5 billion in the third quarter, according to data from research firm PitchBook. That’s more than the $ 5.3 billion raised over the whole of 2020 and the $ 7 billion raised in the first quarter, the previous record.

Such trends are the reason why Abras M. Barhydt is always optimistic. He believes the current market hiatus may be short-lived. I don’t think we’re done, ”he said. You are going to see another explosive move in crypto.

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