Is Bitcoin just a ‘temporary fad’?
Although the cryptocurrency market was hit hard by the latest string of negative news, one analyst believes this is all just ‘noise’.
- Bitcoin (BTC) price fell under a long-time support level of US$30,000 on Tuesday (22 June 2021)
- Ethererum (ETH) price was also routed by over 22%
- The losses came after China’s central bank said it urged several banks and fintech firms to step up their checks on cryptocurrency transactions
- One BTC bull believes the asset can still hit US$100,000 a coin at the end of the year
- Meanwhile, a recent JPMorgan survey showed that nearly half of investors believe Bitcoin is either ‘rat poison’ or a ‘temporary fad’
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BTC, ETH price: What’s the latest?
Bitcoin plunged below its support zone of US$30,000 on Tuesday, a day after China’s central bank said it has intensified its crackdown on cryptocurrency trading.
This was the cryptocurrency’s lowest price level since January this year.
Meanwhile, Ethereum - the world’s second largest digital currency, sank as much as 22.5% over two days to a three-month low of US$1,731.
This latest bout of news from China also hit the share prices of crypto-centric companies like Coinbase and Argo Blockchain, with each losing over 7% and 16% of their valuations since Monday.
Cryptocurrencies have been on a steady decline in the last one week, despite positive forecast statements from analysts in recent times.
What caused the decline?
During a recent meeting, the People’s Bank of China (PBOC) urged several banks and payment platforms to step up their checks on cryptocurrency transactions conducted on their channels, Reuters reported on Monday.
‘Speculative trading in virtual currencies roils economic and financial order, spawns the risks of criminal activities such as illegal asset transfers and money laundering, and endangers people's wealth,’ the PBOC said in a statement.
The PBOC had reportedly advised financial institutions, including China Construction Bank, Industrial and Commercial Bank of China and Ant Group’s Alipay, to begin more thorough investigations into clients’ accounts, and freeze the ones that had engaged in cryptocurrency transactions.
Over 90% of bitcoin mines in the country were also shut down by authorities on Sunday, according to local newspaper Global Times.
This latest development comes a month after the country’s cabinet, the State Council, had stated that it would tighten restrictions on bitcoin trading and mining.
Besides issuing a warning to investors against speculative crypto trading, the State Council also banned financial and payment institutions from providing cryptocurrency services.
What are the implications for Bitcoin, Ether and more?
One analyst views the Chinese government’s latest moves as a familiar ‘flexing of regulatory muscle’.
‘China often does this,’ Charles Hayter, CEO of crypto data firm CryptoCompare, told CNBC.
‘When China sneezes, bitcoin catches a cold. But this flexing of regulatory muscle is often just that — in the past eight years, this story has risen its head at least three times.’
Wall Street strategist Tom Lee, a BTC bull, was unfazed by the latest crypto correction. He reiterated an earlier stance that Bitcoin could still potentially reach over US$100,000 per token by the end of 2021.
He said that while the asset ‘is in a very rough patch now’ due to the recent spate of negative headlines which he personally views as ‘noise’, it also presented a ‘great buying opportunity’ for investors looking to enter the market.
Lee believes that Bitcoin could easily recover to previous highs, and even more, as it tends to make most of its gains over ten trading days a year.
Nevertheless, one in three investors surveyed in a recent JPMorgan poll considered cryptocurrency as ‘rat poison’, with another 16% viewing it as a ‘temporary fad’.
‘Investors’ view on cryptocurrency’s future is very divided’, wrote JPMorgan analysts Marko Kolanovic and Dubravko Lakos-Bujas.
‘Four in five (81%) investors expect tighter regulations of crypto with almost all (95%) believing fraud is somewhat or very much prevalent in [the] crypto world,’ they added.
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