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Bitcoin’s getting smashed again: What’s going on?

·3-min read
(Source: Getty, BBC)
(Source: Getty, BBC)

Cryptocurrency prices have slid further into the red amid concerns that government authorities have more power over digital coins than previously thought.

Bitcoin’s price has hit a two-week low, while two of the largest digital currencies, Ethereum and Ripple, have dropped by 35 per cent and roughly 50 per cent compared to a month ago. The meme coin Dogecoin which once enjoyed a rapid ascent, reaching US$0.722 at its peak, is now sitting at US$0.32.

Recent news that the FBI had recovered most of the Bitcoin ransom paid to the Colonial Pipeline hackers has led investors to question just how ‘decentralised’ and outside of government control cryptocurrency really is.

The overnight dip is “linked to fears of the Feds seizing people’s Bitcoins,” said Bloomberg Intelligence senior commodity strategist Mike McGlone.

“We’ve been in a down-phase for a month now and this is part of it. It’s a continuation of the latest downtrend and this is the latest spark. I thought Bitcoin would be up today on the Colonial news so I’m befuddled,” he continued.

Bitcoin price, as at Wednesday 9 July 2021. (Source: Yahoo Finance)
Bitcoin price, as at Wednesday 9 July 2021. (Source: Yahoo Finance)

Meanwhile, comments made by former US President Donald Trump that Bitcoin is a “scam” and “another currency competing against the [US] dollar” have further fed uncertainty about the coin’s future.

“If [Trump] returns as president that would be bad for cryptocurrencies if he continues to hold his current views, and crypto markets sold down on this,” cryptocurrency research firm CoinCurrent founder James Gerrard told Yahoo Finance.

Fears about tighter regulation of Bitcoin are also spiking, said crypto lender Nexo co-founder Antoni Trenchev.

“Big picture, what we’re experiencing here is a tedious, drawn out regulatory overhang which will continue to weigh on the Bitcoin price.

“Ultimately it’s good for the industry – and crypto needs the right sort of regulation – but for short-termists out there, it’s probably best to look away.”

Overall, the hype around cryptocurrency looks to be fading, said investment platform eToro analyst Simon Peters.

"Despite these stories there seems to be significant uncertainty in play. Beyond just price, demand for transactions and settlements has waned considerably,” Peters said.

“Almost all on-chain activity metrics point to a big decline from the all-time highs earlier in the year.”

What should I do with my cryptocurrency?

According to Peters, stick to basic investing principles: ignore the noise.

“Do your research, understand what you are investing in and do not invest more than you can afford to lose,” he said.

Cryptocurrency exchange Kraken Australia managing director Jonathon Miller said the volatility in Bitcoin and the broader crypto market’s prices is to be expected, and he was still seeing significant interest from new users in trading the digital currencies.

“This is a natural part of the cycle for a rapidly growing and innovative asset class,” he told Yahoo Finance.

"Investors don’t always expect markets to be a smooth ride and we’ve seen evidence of that in the ongoing support of crypto.

"This shows people aren’t spooked by the volatility of crypto.”

A recent Kraken survey showed four-in-five crypto investors actually plan to buy more, he added.

“So there’s still plenty of appetite there for the asset and people clearly still see its value in a balanced portfolio.”

–with Bloomberg

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