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Jul 29

What’s happened to the crypto market? Is it a ‘buy’ opportunity?

Depending on your point of view the current times are either pro or con cryptocurrencies!

It looks like (for the moment at least) Bitcoin is on the up (currently it’s worth over $46,000 which is around £33,000) and all the other major cryptocurrencies are up too,

Will it continue to go up? It’s quite possible, but not without some big dips along the way!

 

latest crypto news

The good news (and I do think it is good news) is that Western governments and banks are cracking down more on cryptocurrencies. I think that is good news because it shows they are scared. They are taking crypto seriously and realise that it is a genuine threat to their status quo.

A number of banks in the UK, particularly Barclays, are refusing to transfer customers’ money into cryptocurrency exchanges, even when those customers make it clear that they know what they’re doing. This shows the banks are worried about the competition from crypto – and they’re right to be.

At the same time, Amazon is showing a lot more interest in cryptocurrencies (as you can see here) so that is helping to push the price up right now.

binance

A number of banks now won’t transfer money to the cryptocurrency trading platform Binance. HSBC has been the latest one to say that. This is after a warning from the FCA about dealing with the company.

Personally I see nothing wrong with Binance. I use it myself and recommend it to others but now that the FCA has put their foot down it’s probably best to stick to Coinbase and Kraken for the moment.

the money printers go round and round

Every time one of the big Western governments prints more money (and they’ve been doing it like it’s going out of fashion in the last year and a half) investors get worried and look elsewhere for a store of value. Bitcoin and other cryptocurrencies are one such store of value. Hence the prices go up.

We seem to be in an up-cycle at the moment and as inflation bites and governments seem less and less able to cope with reality, more people are moving into crypto. Will it keep going up? I think it could but with crypto you can never tell!

musk!

Back in May Musk made a statement (on Twitter of course) that Tesla might sell its Bitcoin. Surprise, surprise that turned out to not be true, which could end up interesting the U.S. Securities and Exchange Commission (SEC), although I’m sure Musk will talk his way out of it.

But the damage was done. Add that to reports that the People’s Bank of China was banning cryptocurrencies as a form of payment (old news actually, but reported as new) and Bitcoin tanked BIG TIME, dragging Ethereum and many other coins down with it. So what’s happening now and what should you do?

will crypto continue to go up?

Maybe, maybe not.

Yes, that’s about as definite as you can get with the crypto-sphere!

However, quite a few crypto enthusiasts are bullish about crypto’s direction this year and next year at least. Sam Volkering, investment director at SouthBank Investment Research says “these cycles can move really hard and fast either up or down, You can be out of the market for a minute and miss a massive jump. There were big ‘ups’ in 2011, 2013, 2017 and 2020. From my perspective we are in the middle of the current cycle. I think there’s going to be another hockey stick move higher maybe towards the end of the year or early next year.”

This is why so many crypto investors who take a long-term view of the market ‘hodled’ back in May when so many short-erm thinkers sold out when Elon Musk and the Chinese Government made the market tank for a while. Long-time investors in crypto stood their ground seeing the big dip as a needed correction, but many investors sold as quickly as they could and moved into gold which saw a rapid price rise on the day.

Recent news that has boosted the popularity of cryptocurrencies includes Amazon advertising for a digital currencies and blockchain lead developer, as mentioned above, and also increased interest in the sector by major City institutions like JP Morgan and Goldman Sachs.

 

is Elon Musk losing his hold over cryptocurrencies?

He certainly is when it comes to serious investors. He has held rather too much sway over crypto prices in the past – particularly Bitcoin and dodgy Dogecoin – but his erratic behaviour over the last year

You may remember that Elon Musk and his ‘fratboy’ friends were the ones who bigged-up Dogecoin (a joke coin from beginning to end) and then he made it crash by a comment on the U.S. TV programme Saturday Night Live.

However, that behaviour and his recent comments on Bitcoin have primarily served to make investors – particularly crypto enthusiasts – respect him less. As this article in Coindesk shows, the response to his tweets about Bitcoin has been generally to ridicule his position.

So, although he did effectively push down the price of Bitcoin, Ethereum and many other coins, the effect didn’t last as long as it might have done this time last year. Quite a few people (myself included) went in a ‘bought the dip’ so Bitcoin and others have bounced back quicker than might have been expected.

 

What is happening with the crypto market short-term?

Well guess what? It’s going up and down.

Sam Volkering says we’re going through a ‘tug-of-war’ time between those who want to push DeFi (Decentralised Finance) forward and those that want to regulate it out of existence.

“The last few months have been a bit of a tug of war between retail investors and institutional investors and governments and regulatory bodies” he says. “These are all issues that have persisted since 2013 when institutions and governments started to get a sniff of it. They’ve only taken crypto seriously in the last six months which is a by-product of the rise in value of crypto as seen in fiat money. Now they’ve piped up and decided that this is something they need to look at more because crypto is an existential threat to the established financial system. The biggest weapon that most governments and central banks have is their control over money. Crypto is a threat to that. This tug of war is playing out in real time at the moment.”

So we should expect more of the same for the next few months at least, that is more ups and downs, some of them quite vertiginous, but it’s likely that, over time, the market will continue to rise. If you’re currently hodling…keep on, is my motto.

You can use crypto through visa

It’s becoming more widely realised that it’s actually possible to use crypto debit cards to buy things all over the world.

So, open a crypto debit card – here is a list of over 30 to choose from – and you can spend your Bitcoin wherever you can use Visa. As you shop, money is transferred from Bitcoin into the currency that you have just made your purchase.

Mind you, given that Bitcoin could potentially go up tenfold over the next few years, would you really want to spend it right now?

Amazon

The other interesting news is that Amazon has recently hinted that it could start taking cryptocurrencies as payment in the near future. In fact the company has also advertised for a Digital Currency and Blockchain Product Lead in its jobs section which shows that it’s serious. That one job ad pushed the price of Bitcoin and other currencies up when it appeared a few weeks ago!

 

What is happening with the crypto market long-term?

In my view Bitcoin, Ether and many other cryptocurrencies have a long future. I personally invest in cryptocurrencies because I think they are the future of money. So, as with my stock market investments, I take a long view.

To me, the dips that come along present a really decent discount on coins that are likely (though not definitely) to go up in value over time, so they are a ‘buy’ situation for me. I bought some more Ether when it dipped in May. It was the drop I’d been waiting for. I bought some more Bitcoin the day after.

Many would disagree with me, including crypto-skeptic Laith Khalaf at stockbrokers A.J.Bell who commented:

“Consumers and investors may start to shun cryptocurrency, when they discover it’s an environmental deadweight, particularly younger Bitcoin fans who are also likely to be sensitive to climate issues. Bitcoin mining uses up a phenomenal amount of energy, and unlike traditional metal mining, doesn’t actually produce anything which is useful in the economy. Even celebrity endorsements may dry up as public figures become wary of being associated with an environmentally unfriendly product.”

But there is now the possibility that renewable energy plants might use their downtime to mine Bitcoin (and other coins). This would enable them to make money and become viable businesses without having to have Government grants.

As this article from Bloomberg reports, an investment fund called ARK has been researching possibilities for Bitcoin and sees opportunities for miners to help green energy rather than over-using fossil fuels. It quotes ARK as saying: “Critics “assert that the computation required to secure Bitcoin, even if necessary, is environmentally damaging and ruining the planet,” the ARK research said. “We believe that the opposite is true: a world with Bitcoin is a world that, at equilibrium, generates more electricity from renewable carbon-free sources.”

If this is the case, not only does it silence the nay-sayers who point to Bitcoin’s energy-hungry nature, but it also gives this, and other cryptocurrencies, a truly long-term future, proving its use-case in more ways than one.

el salvador

Just recently, El Salvador announced that Bitcoin would be accepted around the country as a legitimate currency for payments generally. So you can go into a supermarket in El Salvador and buy your groceries with Bitcoin.

This to me is proof that, while Western countries see no real need for Bitcoin or other cryptocurrencies, developing countries with volatile currencies actually do need crypto to give themselves stability and, potentially, enable themselves to break free from the US dollar.

I think that this is why governments – particularly the US one – are worried about cryptocurrencies. There is clearly a serious use-case for them in the developing world and, let’s face it, that is the vast majority of the world’s population.

 

This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

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