Is bitcoin dead?

Bitcoin price has crashed since April from $65,000 to $35,000 currently. Is this the sign that the most famous of cryptocurrencies will fall into oblivion? Not so sure, because bitcoin has already died 422 times…

In recent weeks, the euphoria has given way to a certain feeling of expectation or even fear on the cryptocurrency market and the most famous of them: bitcoin. The 50% fall that followed its peak on April 14, to nearly $65,000, has indeed put an end to an insane surge of +117% since the start of 2021 and even +580% since July 2020. Currently its valuation oscillates between 30,000 and 35,000 dollars, i.e. its level of January 2021, for a falling capitalization of 1,000 billion dollars compared to the peak in April.

For Vincent Boy, market analyst at IG France, it’s Coinbase’s resounding IPO, one of the leading cryptocurrency buy-sell platforms, which triggered this sharp drop. This prospect, going in the direction of an institutionalization of crypto players, has attracted crypto-investors, boosting the rise in prices. Those who entered the market earlier, at lower levels, took the opportunity to sell their bitcoin at a very good price. These circumstances remind him of those at the end of 2017 when the last bitcoin bubble burst. “In December 2017, there was a breakout on the day of the arrival of futures on bitcoin [contrats à terme qui permettent de spéculer sur les variations de prix à la hausse comme à la baisse, ndlr]. The peak of $20,000 then reached was followed by almost 3 years of selflessness. Similarly, this link between finance and the crypto-asset market can be observed again. Coinbase’s IPO in mid-April, corresponding to bitcoin’s all-time high, launched a profit-taking movement, ”explains Vincent Boy to MoneyVox. “It is possible that it played, underlines Giulia Mazzolini, director France of the Austrian broker in cryptocurrencies Bitpanda. But we would still have had a correction sooner or later. It was predictable given the very rapid rise that preceded it. It is even rather a sign of health”.

Coingecko price, MoneyVox chart, July 2021

Regulatory screw turn

Following this crash in mid-April, a chain of negative events accompanied the decline of bitcoin, such as Binance’s UK banthe largest cryptocurrency platform, suspected of breaking regulations, but above all the turn of the screw decreed in China. In May, the Chinese Communist Party decided to close the bank accounts of crypto-investors and ban mining on its territory, this essential computer calculation to issue bitcoin and validate transactions. However, 60% of the mining was done in China. This has therefore caused a significant drop in the speed of transactions, the time that the computer protocol adapts to the decline in computing power. This was also accompanied by a fall in its price. During the single day of May 19, bitcoin thus lost 13% of its value.

“The Chinese decision is not surprising, Chinese power has been threatening the bitcoin ecosystem for a long time,” said Manuel Valente, scientific director of the French platform Coinhouse. Indeed, as early as 2013, Beijing wanted to ban bitcoin. Rebelote in 2016, 2017 and 2019 when China announced turns of the screw. ” This time, it looks like it’s serious. But the implications are not monstrous, assures Manuel Valente. The miners are in the process of moving their equipment to more lenient areas, in Kazakhstan, in Texas, too, as surprising as it may seem, ”explains the scientific director of the former Maison du bitcoin.

China’s position could, however, fuel the regulatory ambitions of other countries. “Central banks and states are starting to worry about the cryptocurrency craze. China has taken the lead in the fight against speculation. For a very simple reason, it wants to promote the e-yuan of which it will be able to control all the exchanges”, analyzes Marc Fiorentino, co-founder of Meilleurplacement. Closer to home, the Governor of the Banque de France called on the European Union at the end of June to quickly adopt a regulatory framework for crypto-assets. “I must emphasize the urgency here: we don’t have much time left, one or two years,” declared François Villeroy de Galhau.

In this context, the positions taken more favorable to the crypto ecosystem, such as on June 9 when El Salvador made bitcoin an official currency on its territory, were not enough to trigger a new euphoria on bitcoin, nor on other major cryptocurrencies. Not surprisingly, “the movements are very correlated. If bitcoin falls, other crypto-assets fall too,” notes Vincent Boy of IG France. This can happen with a lag of a few days (see infographic). “This point of the regulations is important [fiscalisation, encadrement de l’effet de levier, de l’achat-vente par exemple, ndlr]. Because regulation can curb speculation. Gold bitcoin is first and foremost a speculative asset “Adds the IG France analyst.

Read also: Bitcoin: what is it used for on a daily basis?

Speculators ousted from the market

There are indeed two types of players in the crypto market: long-term investors and speculators who use derivatives to leverage. That is to say, go into debt to invest more and increase their potential gains, but also their possible losses. In the event of a market reversal, if the speculator’s trading account falls into the red, he is then asked to pay money (in financial jargon, this is called a “margin call”) or to close his positions. The resulting movements can then trigger chain sales. “This is what happened on May 19,” analyzes Julien Moretto, head of content and communication at Coinhouse.

” In contrast, big wallets, long-term believers in bitcoin, don’t panic. Whales [le nom donné aux gros investisseurs, ndlr] who have between 1,000 and 10,000 bitcoins [ce qui équivaut au cours actuel entre 35 et 350 millions de dollars, ndlr] fell between February and April. Since mid-May, when the price fell back to 35,000, this amount of very large wallets has not diminished. Their number remains stable today at 2,200”, continues Julien Moretto. Proof, according to him, that there is no danger in delay despite the decline of bitcoin in recent weeks.

Bitcoin: secure sites in our exclusive comparison

Conversely, more small investors left the market. The number of wallets holding between 0.1 and 0.5 bitcoin [valant aujourd’hui entre 3 500 et 17 500 dollars, ndlr] fell by 100,000 in June. At its level, the rather mainstream broker Bitpanda also observes this lesser enthusiasm. “We have 30% fewer people who registered in June compared to April-May,” according to Giulia Mazzolini.

A bitcoin that has become institutionalized

But neither Bitpanda nor Coinhouse seem to fear the extra regulation. ” Regulation is a pledge of confidence for investors. This means that there are institutions that oversee the industry”, assures the France director of Bitpanda. “We are not turning in Europe to the prohibition of transactions. The EU is working on a single regulation, an ecosystem framework, as part of the MICA project [marché de crypto-actifs, ndlr]. This is a good thing, because Europe realizes that there are jobs and European champions to bring out,” adds Manuel Valente of Coinhouse. France has already created, via the Pacte law of May 2019, digital asset service providers who must register with the Autorité des marchés financiers to operate. As of July 1, around 20 registrations have been validated, including Coinhouse and Bitpanda.

This is why none of the people contacted predicted the disappearance of bitcoin. “Technologically speaking, it is impossible to stop bitcoin. As long as the internet works, bitcoin will continue to work, quips Manuel Valente. Bitcoin will remain a tool for diversifying wealth. At Coinhouse, 99% of our customers come for the purpose of investment and not to use it as an exchange currency, its initial raison d’être, ”continues the scientific director of the crypto broker. “I don’t think bitcoin will go above $100,000 as some are predicting. But, I also don’t believe it will drop to 1 dollar. It will remain a market in its own right, a speculative asset, but it will not disappear “, also believes Vincent Boy of IG France. For the anecdote, according to the site 99Bitcoins which lists the main speeches against the mother of cryptocurrencies, there have already been 422 unfortunate prophets of the death of bitcoin since 2010. So betting on the end of bitcoin is a perilous exercise. Especially since 2020 marked the entry of institutional investors into this market and listed companies, such as MicroStrategy or Tesla, which have invested part of their cash in bitcoins.

Watch out for the $27,000 threshold

In the immediate future, what to expect from the price of bitcoin? It is an asset whose price fluctuates from day to day (also according to the tweets of Elon Musk, the boss of Tesla “best enemy” of bitcoin) which makes any short forecast complex term. The observation of its past values ​​can nevertheless make it possible to detect thresholds, price ranges, to be scrutinized which could trigger a new fall in price. ” In June, bitcoin fell briefly to $27,000. It is this level that must be preserved. Below, the situation could deteriorate,” explains Julien Moretto of Coinhouse.

Other threshold to watch, that of 20,000 dollars. “It’s quite psychological because it was the highlight of 2017,” explains Vincent Boy. It was after this bar passed, in mid-December 2020, that the price of bitcoin soared (its value had doubled in 3 weeks). On the other hand, going below could cause cascading sales, as has already happened in early 2018. This type of analysis borrowed from traditional finance does not, however, enjoy consensus in the community of crypto-investors.

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