Ever since it reached the $40,000 level, Bitcoin is in retreat. What is interesting is that every time it falls, it does so in such an aggressive way, that many traders that planned on buying the dip, get scared.
In fact, this is a normal reaction on a market that lacks liquidity. Despite the fact that the cryptocurrency market capitalization exceeded $1 trillion, executing large orders leads to violent market moves.
Central Banks Speaking Out Loud Against Cryptocurrencies
The rise of cryptocurrencies should not surprise at all. The extent of the upside in Bitcoin, Ethereum, and other main cryptocurrencies, should.
If you listen to the arguments presented by mainstream investors, institutional, not retail, the overwhelming response is protection against inflation. In other words, it is a lack of trust in the current financial system that leads investors to Bitcoin.
After Bitcoin reached $40,000, it fell over twenty percent in a couple of days. When Janet Yellen testified in front of the U.S. Senate, as part of the process of taking the helm of the U.S. Treasury Secretary, cryptocurrencies were part of her speech. She expressed ongoing concern in the illicit transactions involving cryptocurrencies and urged for regulation in the space.
One week later, it was Christine Lagarde, the ECB head, that urged similar actions. After both interventions, Bitcoin fell precipitously.
When presented with the opportunity to invest in the Ford Motor Company, JP Morgan, the legendary banker, graciously refused. “That’s just a toy for rich people” – he is credited with saying.
Such arrogant views look similar, to some extent and respecting proportions, to what happened to Bitcoin. At first, no one noticed it. Next, it reached close to $20,000 in December 2017. Suddenly, it was on everyone’s lips. Moving forward, it was mocked by all investment bankers – JP Morgan’s Jamie Dimon, the current CEO, famously said three years ago that Bitcoin “is a fraud and will blow up.”
And where is Bitcoin now?
Last Thursday, one news made headlines. Blackrock, the largest assets manager in the world, expressed its desire to venture into Bitcoin investing. It wants to offer its clients exposure to Bitcoin futures through some of the funds it holds.
Bitcoin was, is, and will be a controversy for a long time. But one thing is sure – the longer it exists, the more difficult it will be to “blow up.”