Remember when Bitcoin was knocking on $20,000? Today it’s it’s in a freefall, trading in the $6,000 range.
Crypto markets tumbled again last week after Japan’s financial regulator ordered several cryptocurrency exchanges to beef up anti-money laundering practices. The move prompted the country’s largest crypto exchange to suspend creation of new accounts. Bitcoin fell nearly 9%.
Last week got off to a bad start for the crypto world even before Japanese regulators got involved. The Bank of International Settlements released a report criticizing cryptocurrencies, saying they are “a poor substitute for the solid institutional backing of money.” Of course, a report by central bankers won’t sway any sane crypto supporter, but it doesn’t help raise the confidence of the average Joe who was caught up in Bitcoin mania just a few months ago, but doesn’t really understand the intricacies. For cryptos to truly succeed, you eventually need mainstream adoption. This kind of reporting doesn’t help the cause.
Regardless of your opinion of the BIS report, it was another punch in the gut for a crypto market that has already absorbed a lot of body blows in recent months.
As SRSrocco put it, not many assets fall 9% in a day. But Bitcoin actually fared better than some of the other cryptocurrencies. Litecoin dropped almost 13%.
Of course, cryptos are known for their volatility. It’s not the sharp fall on last week’s news that’s so concerning. It’s the steady downward trend.
And it’s not just Bitcoin. All of the major cryptos have dropped precipitously over the last six months.
Of course, some of this is due to the strength of the dollar. Many assets are getting beat around right now.
Some crypto supporters say the market is being manipulated by the powers-that-be. Of course, as SRSrocco pointed out, “One of the key reasons to own cryptos was due to them being decentralized… thus not subject to manipulation. However, all assets can be subject to manipulation, even by the “Whales” who control a large percentage of Bitcoin. So, manipulation can push prices higher or lower.”
There is also bad news for cryptocurrency miners. According to a recent report at Cointelegraph:
The leading cryptocurrency has now fallen below what some commentators consider to be an average BTC mining profitability threshold of $6,500. Robert Kelly told CNBC earlier today that this figure assumes that Bitcoin miners need to update their hardware almost every 18 months, bringing the costs of mining to roughly between $5,900 and $6,000.”
Peter Schiff talked about cryptocurrencies at the end of his recent podcast. He said there is there is a Ponzi-like nature to the crypto world.
It’s a zero-sum game. The money that people make in cryptocurrencies is going to equal the money that other people lose in cryptocurrencies. Ultimately, there is a lot of paper wealth that is created as the bubble inflates. Then it disappears into money heaven as the bubble deflates.”
He pointed out that the market cap of all cryptos has dropped about $600 billion. But that money wasn’t really “lost.”
It never really existed. It was all on paper. People didn’t actually invest $600 billion into cryptos. That was just what they were worth based on the last trade.”
One thing is certain: the blockchain technology that Bitcoin is built on isn’t going anywhere. And despite the negativity out there, people in the crypto world will remind you that the technology is still new and quickly developing. Many of the problems we see today will be solved. You wouldn’t want to judge the success of the telephone on Alexander Graham Bell’s model.
Regardless of whether you are bullish or bearish on the long-term prospects for cryptocurrencies, the current trend is clearly down. Does this mean you should abandon Bitcoin and other cryptocurrencies completely? That’s a decision every investor needs to grapple with.
Regardless, diversifying your cryptocurrency portfolio with precious metals can help mitigate some of the downsides and put you in an overall stronger financial position.
Just consider the old adage – you don’t want to put all of your eggs in one basket.
SchiffGold can help you convert some of your Bitcoin to gold. Call 1-888-GOLD-160 for more information.
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