Cryptocurrency update: Bitcoin bear run rolls on

Bitcoin’s bearish turn seems to be continuing but there is hope a late rally is still on the cards for Ethereum.

Cryptocurrency update

Bitcoin languishes around $45,000

Another week begins and Bitcoin fails to ignite once more. Despite being up over 300% across the year, the last month of 2021 appears to be a bit of a damp squib for Bitcoin.

The search for $50,000 started last week. It doesn’t look like it’ll be found any time soon.

At the time of writing, BTC was trading around the $45,700 level – down 2.8% on the day. Lows on the day put BTC at around $45,500, so a bit sideways in terms of intraday trading.

Bitcoin is now down 30% off its all-time high of just shy of $69,000. Mid-November seems a long time ago now.

Other coins are being dragged down in BTC’s wake. Ethereum, for example, continues its own backslide. ETH was down 3.0% on the day, trading for around $3,800. It still sits some $1,000 off its all-time high.

Unlike Bitcoin traders, however, Ethereum investors are feeling fairly bullish. Over-the-counter trading desk Paradigm has noted that 18,500 for a $4,400 call option and about $14,000 for $4,200 on Ethereum in Asian trading on the morning of Monday 20^th December.

Could a Santa rally be on the cards for Ethereum? The outlook is certainly more optimistic regarding ETH than Bitcoin.

Paradigm has an institutional focus. Most of its clients represent conglomerates or organisations rather than individual investors. We saw last week that some market overserves believe Ethereum could overtake Bitcoin if the world moves towards mass cryptocurrency adoption, purely from a practicality and utility standpoint.

As such, an upswing in institutional interest may provide ETH with an impressive growth engine moving forward.

Bank of England to ramp up crypto regulation talks

The Bank of England is planning on stepping up international talks on creating a crypto regulatory framework, reports the Sunday Times.

The impetus for this increase in collaboration stems from data collection. The BoE is finding it difficult to find the information it needs on institutional exposure to cryptocurrency to help inform any future policies.

According to BoE Executive Director for Financial Stability and Risk Sara Breeden, the Bank cannot gather the requisite data alone. Breeden has called on the G-20’s global financial stability watchdog, the Financial Stability Board, to lend a hand.

Breeden said the need to increase regulation came from an increased number of banks offering crypto trading and custody for their clients. High activity in this sphere must be carefully monitored, the argument goes, in order to protect financial systems worldwide.

It should be pointed that the BoE doesn’t necessarily think Bitcoin or digital tokens are an imminent threat to the UK’s finances. It has, however, expressed the need for caution, especially given how fast crypto networks and holdings have grown in the past year.

“Material growth in banks’ exposures to unbacked crypto assets would expose them to financial, operational and reputational risks,” the central bank said.

Hail the 0.01%: whales horde Bitcoin

More than a quarter of all Bitcoin in circulation are being held by less than 0.1% of accounts as reported by Cointelegraph.

A study from US non-profit organisation The National Bureau of Economic Research claims 10,000 accounts hold 27% of all 19 million BTC currently on the market. Those 10,000 accounts collectively hold approximately five million tokens.

The Wall Street Journal values this collection at around $232m.

The study was undertaken by finance professors Antoinette Schoar at MIT Sloan School of Management and Igor Makarov at the London School of Economics. Its end goal was basically to show how Bitcoin and crypto are not as democratic or decentralised as once thought.

Indeed, it’s hard to see exactly how a currency can replace fiat and existing currencies when the exchange rate currently sits at over $45,000 per token.

“Despite having been around for 14 years and the hype it has ratcheted up, it’s still the case that it’s a very concentrated ecosystem,” Schoar said.

As much as 5% of Bitcoin tokens are thought to be controlled by BTC originator Satoshi Nakamoto. What’s more, up to four million coins may simply be lost due to inaccessibility. None of this points towards BTC being a viable alternative to the dollar, pound, euro, and other established currencies.

However, Bitcoin instead may simply become a store of value.

Either way, it looks like there’s a long way to go for decentralised finance to become truly decentralised.