Cryptocurrency prices are facing a period of turmoil, after months of rampant gains that until April seemed to have no ceiling. But just like what happens with traditional financial assets, “the trees don’t grow to the sky”, the adjustment of the lush hikes happens sooner or later, and in the case of an unregulated market like that of digital currencies, the oscillations are much more pronounced and sudden.
An example of this behavior was the sell-off that shook Bitcoin over the weekend, with a price floor below $33,000 on Sunday, and later recover to almost USD 40,000 Monday afternoon.
Today, the most popular digital currency is traded around USD 37,000, in search of a new equilibrium value, after moving away from its historical maximum of USD 64,895 on April 14.
Although the effect was short-lived, the crypto rises appeared to revitalize after the CEO of Tesla, Elon Musk, communicate through a message on his Twitter account that spoke to North American Bitcoin “miners”, who “undertook to publish current and planned renewable use” of energy and that they will also ask other miners around the world to do the same. Musk called this initiative something “Potentially promising.”
It also supported Bitcoin that after Mathew McDermott, Global Head of Digital Assets at Goldman Sachs, noted that it is time to take Bitcoin much more seriously as an invertible asset.
“Bitcoin is now considered a invertible asset. Have your own idiosyncratic risk, partly because it is still relatively new and is going through an adoption phase,” said McDermott.
In just a month and a half, the price of Bitcoin ranged from a high near $ 65,000 to a low near $ 32,000
On the other hand, the Ether, the currency associated with the Ethereum blockchain network and second in importance, lost 17% to USD 1,905 on Sunday, but now it defends an appreciable 25% recovery, to reach $ 2,400 again.
For many cryptocurrency investors, including many young people traders newly initiated in financial matters, the memory of the “Black Wednesday”, when last May 19 the “crypto” crash wiped out $ 350 billion of market value in a matter of hours.
So Ether plunged 50% and Bitcoin 30%, after the chinese government announced that banned financial institutions and payment companies from accepting cryptocurrencies or provide relevant services.
In recent months, the expectation of an eventual weakening of the dollar supported the advance of cryptocurrencies.
A bullish rationale for both cryptocurrencies and global stocks and bonds was the growing expectation for an eventual dollar weakening.
This Tuesday, Dollar index hit four and a half month lows, since the insistence of the Federal Reserve That monetary policy would remain stable eased fears that inflation would lead to higher interest rates.
Investors are holding short dollar trades in the belief that low US rates They will see the funds go abroad as the world recovers from the pandemic.
Market participants are wary of increasing positions after a jump in US inflation in April cast doubt on the outlook for monetary policy, but appeared to find reassurance in recent data and statements by Fed members.
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