Cryptocurrency update: Bitcoin tracks big loss

Bitcoin switches to sideways trading as it sustains one of its worst-ever month-to-month dips.

Crypto update

Bitcoin still struggling

The recent Bitcoin plunge has caused a crisis of confidence for traders.

Prices slumped to $31,000 on May 19th following two hefty market body blows. The first was Tesla’s decision to backtrack on accepting BTC for payment. China’s clampdown on crypto mining was the other knockout punch, sending Bitcoin reeling.

The above triggered a panic-induced sell-off amidst newer traders unfamiliar cryptocurrency markets volatility.

As of Monday, May 31st, BTC was on track for its second-largest ever monthly percentage decline. Bitcoin was trading down 37.5% month-on-month in May. September 2011’s 40% monthly drop remains the largest so far.

Prices fell as low as $34,195 on Monday but had climbed back above $36,360 by midday UK time on Tuesday 1st June.

So, what can Bitcoin do to sustain a prolonged rally? Restoring market confidence is key here. Hope may lie in the whales.

Whales are clusters of blockchain addresses controlled by a single participant with at least 1,000. Sustained BTC accumulation by such entities may be the catalyst the market needs to feel confident about Bitcoin investment once again.

The last time whales scooped up more tokens, October 2020-February 2021, prices rose in tandem. Correlation does not equal causation, but this could be a good metric to follow.

For context, the supply of BTC held by such whales has increased to over 4.4m since the May 19th price collapse as wallet-owners buy the dip.

But as it stands, BTC looks like it’s trading sideways. It will probably be some time before whales can really make a visible splash on price action.

Tighter crypto regulations on their way around the world?

A tougher regulatory environment may also negatively impact cryptocurrency prices going forward.

We’ve already seen the effects of the Chinese government moving against miners. The UK has flat out banned sales of crypto derivatives to retail customers. Now, other countries are starting to develop stronger regulations regarding crypto production and trading.

New US OCC Michael Hsu has said he hopes different agencies will be able to form a “regulatory perimeter” for digital currency legislation and regulation. According to Hsu, while the will is there to go harder on crypto to protect traders, it’s more a case of establishing which agency is responsible for handling crypto regulation.

“It really comes down to coordinating across the agencies,” Hsu told the financial times. “Just in talking to some of my peers, there is interest in co-ordinating a lot more of these things.”

Sweden’s Riksbank Governor Stefan Ingves has he believes further regulation is on the way – not just in Sweden, but around the globe. His thoughts have been matched by Swedish Finance Minister Asa Lindhagen.

Sweden’s government is in the process of tightening standards for cryptocurrency exchanges, Lindhagen said, but labelled this “a work in progress at the international level.”

Thailand’s Securities and Exchange Commission may move to regulate decentralized finance (DeFi) projects in the country, including the issuance of digital tokens.

In a statement released on Sunday, May 30th, Thailand’s SEC said DeFi activity involving digital tokens such as liquidity provider tokens, governance tokens or tokens issued to those transacting in DeFi projects “must be licensed and abide by the specified rules.”

Essentially, the worldwide environment for trading cryptocurrencies is potentially going to enter a new phase of regulatory oversight and control.

For retail investors, the everyday folk who aren’t necessarily up to speed on the minutiae of crypto token trading, this can only be a good thing.

We’ve seen hundreds of billions wiped off crypto markets in the blink of an eye many times. Bitcoin’s latest crash removed $750m from the token’s total market capitalisation for instance.  Perhaps new regulations will be able to finally tame cryptocurrency’s volatility? Maybe, but because the potential heights caused by rapid swings may turn off potential investors.

Ether makes big search engine noise

Traders are googling up an Ether-shaped frenzy.

Interest in ETH, the token for the Ethereum blockchain DeFi platform, is up in the wider crypto market dip.

When BTC drops, so too do the other major tokens. Ether, which recently broke $4,000 for the first time, has fallen. At the time of writing, ETH was trading for around $2,600.

But like whales snapping up Bitcoin supplies during this downturn, Ether is getting plenty of attention too.

Average monthly Ether internet searches in the US total over 1.1 million. In Germany, over 750,000 searches for the crypto are made annually. Turkey, Brazil and France combined to just over 915,000. In the UK, 230,000 active internet users are searching for Ether each month too.

Ether has exploded in value over the past year. Why? Ether actually holds practical value. The Ethereum blockchain network uses ETH as currency to process transactions. Ethereum is quickly establishing itself as the DeFi platform of choice, thus end-users are snapping up ETH tokens to pay for network transactions.

Because of this, the coin has been in high demand. The knock-on effect is higher investor attention because prices are increasing due to basic supply and demand principles.