Around a day since China banned its financial and payment service providers from offering cryptocurrency services, Bitcoin tumbled to $31,663 on Wednesday evening – lowest since January 28, 2021. But the decline wasn’t just in Bitcoin’s price and neither for just a day due to the ban. The last seven-day price graph of let’s say top 30 or 40 cryptos indicated that a majority of them have been gradually declining including Ethereum, Binance Coin, Dogecoin, Cardano, Polkadot, Internet Computer, Bitcoin Cash, Uniswap, Litecoin, and more, as per the data from CoinMarketCap. In terms of the total market cap of 9,944 coins in existence, the value had contracted 38 per cent from $2.5 trillion on May 12 to $1.5 trillion at the time of filing this report.
“The correction was long foreseen and has limited to do with just China’s crypto ban. The correction was expected in the last couple of months as money had already started to move out of Bitcoin since its prices had skyrocketed. Historically, we witness Bitcoin first moving down followed by an upswing in other coins like Ethereum and Binance coins, etc. The market at this point was looking for some negative news that could act as a trigger. Here, China ban seems to be that trigger,” Edul Patel, CEO and Co-founder, Mudrex told Financial Express Online.
Bitcoin’s price had declined last week and further to $42,185 on early Monday before it jumped back to the $45,000 mark. The decline had coincided with Tesla CEO Elon Musk’s tweet on Sunday suggesting that Tesla would sell its Bitcoin holdings or may have sold it already – in response to a tweet with the handle @CryptoWhale. However, on early Monday, Musk clarified that Tesla “has not sold any Bitcoin.” This had led to some recovery in Bitcoin price.
“For most of this year, we can expect Bitcoin to be range-bound between 45k and 55k peaking to $70k and also dropping to $35; in between. We have been studying institutional buying flow and the order intent and observed very strong buying pressure around $35k, $40k, and $45k in that order. This means that as soon as the price starts slipping below 45 buyers tend to move in and capitalize. In my opinion, the current correction is good for the industry and will help clean out a lot of noise that was built up,” added Patel.
The crypto price volatility has led to renewed caution among fund managers with respect to the future of cryptocurrencies as an asset class. According to a Financial Times report, “Our stance with clients is the 10-foot pole rule: stay away from it…I don’t think the Fed and other regulators are fans of the current market structure for cryptocurrencies,” said Jason Pride, Chief Investment Officer of private wealth at Glenmede. Rob Sharps, President and Head of Investments at T Rowe Price, told the publication that “Crypto has an impact across capital markets, and we’re capital markets experts. Ultimately, the mandates we manage for clients are not well suited for investing in cryptocurrencies, and we recognise the high level of speculation in this space.”
Nonetheless, crypto experts see the impact of the China ban in the short term. “China’s move to ban banks and financial institutions from offering services to cryptocurrency firms will have a dampening effect on crypto prices and market cap in the short term. Currently, altcoins and meme coins are rising at the expense of bitcoin. Sooner than later, the frenzy about meme coins would fizzle out. Ethereum prices are expected to move as a function of the value they bring to the payments, central banking system, and enterprises whereas Bitcoin would continue to have wild swings in the short term,” Sharat Chandra, Blockchain Expert, IET Future Tech Panel told Financial Express Online.
On the other hand, crypto investors and enthusiasts in India are upbeat about the reported constitution of a new government panel that seeks to regulate cryptocurrencies as digital assets. ‘Regulate, do not ban’ has been the common refrain of the Indian crypto community. The government, in its wisdom, seems to have taken cognizance of the alleged potential of the crypto industry. India currently has over 4.2 million blockchain developers, as per industry estimates.
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