Premarket Stocks: Is Bitcoin Winter Starting To Thaw?

1 day agoLast Updated: 30/05/2023

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New York (CNN Business) It has been cold, hard crypt winter. But signs of a thaw, fueled by global currency chaos, are beginning to appear.

What’s happening: Bitcoin (XBT) rose to its highest level in more than a week on Tuesday, gaining more than 5% as the British pound and other currencies took a hit against the ultra-strong dollar. The gains gave crypto bulls hope that it was bitcoin making it a safe haven assetor that acts as a hedge when stocks are falling.

Then, around midday, the dollar strengthened and bitcoin fell again, erasing any recent gains. Bitcoin fell another 1% on Wednesday after the Bank of England tried Consolidate UK debt.

When the dollar is strong, “there is no such thing as a safe haven,” warned Glen Goodman, eToro crypto advisor. CoinDesk on TV tuesday

Some background: Bitcoin is struggling for direction: The digital currency has been fluctuating between $18,000 and $25,000 since mid-June after a major crash wiped nearly $2 trillion from the crypto market. It today it has decreased by 60% year-on-year.

The coin soared during the Covid era on the back of near-zero interest rates, stimulus cash and massive inflows from large-scale institutional investors and reached a record high of nearly $70,000 in November.

Central banks then began raising rates to combat inflation, and the dollar strengthened significantly, appealing to investors as a safe haven of last resort. At the same time, the economy began to sour and bitcoin was still seen as a risky asset by these new investors he left in a heap. The crash caused a wave of failures among young companies such as crypto trading platforms Voyager and Celsius.

“In today’s macro environment, when you have inflation and a big selloff and big crypto projects that have failed, people are going to pull back,” Tyler Winklevoss, co-founder of crypto exchange platform Gemini, told me in an interview. at the beginning of this month. “Bitcoin is still new, so it’s still considered by many as an asset at risk. And as people take risk off the table, bitcoin will suffer. But all assets are suffering, bitcoin is not alone in that.”

The silver lining: But despite falling bitcoin prices, investors see signs of a bottom.

Ben Gagnon, mining director at Bitfarms, sees anything below $20,000 as the price at which fair-weather institutional investors permanently withdraw from the currency, which will help stabilize bitcoin’s current volatility and send it on an upward path.

As of Wednesday morning, bitcoin was sitting below $19,000.

“I would be very surprised if we finished the year that low,” Gagnon said. “I think Bitcoin will start to recover now that it’s shaking off a lot of excess.”

“This is an interesting time,” said Chris Kline, COO and co-founder of Bitcoin IRA, a digital asset technology platform. “Over the past eight months, bitcoin has been behaving like a tech stock because there have been a lot of institutional investors in it.” As that money pours in, he said, things can change.

It’s big TBD, but bitcoin advocates remain cautiously optimistic.

Jerome Powell weighs in on crypto

Crypto advocates aren’t too happy with the Federal Reserve, and that sentiment seems to go both ways.

Fed Chairman Jerome Powell called for more regulation of digital assets in a speech on the digitization of finance at the Bank of France on Tuesday morning.

While crypto bulls have seen market declines and other assets cause digital currencies to fall in value, Powell said he was worried about the opposite. Recently discounted in bitcoin prices, he said, could spread and cause wider financial turmoil. Digital currencies should be regulated and verified like other market assets, he said.

“There is a need for more appropriate regulation,” he said, especially as crypto “expands and begins to touch more retail customers.”

Other central bankers were not as nuanced as Powell. “I don’t see any value” in cryptocurrencies, said Ravi Menon of the Monetary Authority of Singapore. “It’s time to do the math.”

The Federal Reserve does not regulate cryptocurrencies in the United States, but it does monitor cryptocurrencies held by banks. The central bank is also considering launching a Central Bank Digital Currencywhich is basically the digital version of the dollar.

That currency isn’t coming anytime soon, Powell said. “We see it as a process of at least a couple of years, where we are doing the work and building public confidence in our analysis and our final conclusions, which, as I said, we certainly haven’t reached yet.”

Confused about crypto? Congress too.

Representatives Maxine Waters and Patrick McHenry have tried to negotiate a invoice that would regulate the companies behind stablecoins — digital assets pegged to the dollar and used as an alternative to highly volatile cryptocurrencies like bitcoin.

The bill would subject the Federal Reserve to oversight and reserve requirements to protect customers in the event of insolvency, the kind of regulation that Fed Chairman Powell called for on Tuesday.

But he keeps throwing the cans on the road. That’s because Congress has been “debating how to write the text of the bill.” reports Politico. They have trouble getting their heads around how to regulate cryptography.

“I don’t think anyone would advise someone who doesn’t know the industry or is in a position to legally and regulate it,” Ben Gagnon, who works with politicians to support his crypto mining company Bitfarms, told me.

“There have been some federal government initiatives by agencies to look into bitcoin, but that process is largely non-existent,” he said.

The White House recently released its own plans for crypto-regulation, but critics argued that they lacked real teeth. The Blockchain Association, one of the largest digital asset industry groups, said the Biden administration’s report lacked “substantial recommendations.”

Executive director Kristin Smith said in a statement that the report focused too much on criticism of the industry and was clearly political. The report called them “a missed opportunity to strengthen US crypto leadership.”