Bitcoin Scales $51,000 for the First Time Amid Crypto Fever

Bitcoin Scales $51,000 for the First Time Amid Crypto Fever

InvestorPlace

The blowout rally in Bitcoin (CCC:BTC-USD) continues. As I write this, the best-known and most-valuable cryptocurrency trades above $47,000, down modestly from an all-time high set on Thursday morning. Source: Shutterstock Bitcoin now has roughly tripled since November, and rallied more than 50% this year. And the optimism makes some sense. Notably, corporations are increasingly comfortable with adopting Bitcoin. BTC saw a big catalyst this week when Tesla (NASDAQ:TSLA) said it would buy $1.5 billion of the crypto. The electric vehicle giant follows earlier adopters like MicroStrategy (NASDAQ:MSTR) and payment companies Square (NYSE:SQ) and PayPal (NASDAQ:PYPL).InvestorPlace - Stock Market News, Stock Advice & Trading Tips The run over the last four months continues what has been an incredible rally. Bitcoin only launched in 2009. It cleared $1 (yes, one dollar) for the first time almost exactly a decade ago. Give or take, BTC has appreciated 4,700,000% in ten years. There have been few assets in the history of mankind to show that kind of appreciation. Simply put, Bitcoin has created millionaires. But the rally hasn’t been without volatility. In fact, volatility and crashes both have been a key part of the Bitcoin experience. Many of those crashes started in environments similar to this one: when all seemed well, and further upside appeared almost guaranteed. That history suggests another reversal is almost certain to occur. That doesn’t mean investors need to rush to sell their BTC immediately, but at the least they should be on their guard. The History of Bitcoin Crashes For skeptics (and I remain one of them), early 2021 looks an awful lot like late 2017. 9 Meme Stocks That Social Media Won’t Shut Up About At that time, Bitcoin similarly was soaring. Bitcoin cleared $1,000 on New Year’s Day 2017. By December, it was over $18,000. $20,000 and beyond seemed guaranteed. Cryptos of all kinds were rallying. Initial coin offerings were all the rage. But as good as 2017 was, 2018 was nearly as bad. In U.S. dollars, Bitcoin had been halved by February. By the end of 2018, it was back below $4,000. As an article at the time noted, the 2018 decline was not the first huge drawdown the cryptocurrency had seen. Not even close. In 2012, BTC dropped 49% twice, with one of the declines a three-day, 57% punishment. Another three-day period the following year saw an incredible 83% plunge. On Nov. 19, 2013, BTC lost half its value. Later that month, it began a stretch of over a year in which it went from $1,163 to just $152.40. Even in 2017, a banner year, Bitcoin fell 30% or more five different times. And then there was the roughly 80% plunge that began toward the end of that year. Admittedly, of late the volatility has eased somewhat relative to early trading. Wider adoption and a larger investor base should continue that moderation going forward. Still, we’ve seen this before. Bitcoin can move north in a hurry, but it also can move, and has moved, south at roughly the same pace. Three Catalysts And there are a pair of catalysts that could trigger another decline in 2021. The first is simply the parabolic gains not just in BTC, but across asset classes. We’ve seen a number of stocks go crazy. That doesn’t just include miners like Riot Blockchain (NASDAQ:RIOT) and Marathon Patent (NASDAQ:MARA). It even goes beyond the so-called “Reddit stocks” like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). Commodities have taken off. Even in cryptos, DogeCoin, which started as a joke, now has a market capitalization of $9 billion. There are going to be crashes elsewhere, whether in cryptos, stocks, or commodities. And those crashes may well read across to Bitcoin. Surely there is cross-ownership between Bitcoin and other ‘hot’ assets. Those owners that see losses elsewhere are likely to de-risk by converting BTC to USD. There’s also the regulatory environment. Treasury Secretary Janet Yellen has repeatedly and publicly raised concerns about cryptocurrencies including Bitcoin. Certainly, Yellen can’t ban BTC trading and send its value to zero. But she can impact potentially bullish catalysts, like the long-awaited launch of an exchange-traded fund (which would need to be approved by the U.S. Securities and Exchange Commission). Finally, there’s the possibility that Bitcoin itself simply has run too far. It stands to reason that at least some of the incremental buyers since December are not diehard crypto adherents, who believe Bitcoin can disintermediate large financial institutions. They’re just joining in the fun. In modern trader parlance, there may be some “weak hands” that have jumped on board. They’re not necessarily the type to ride out volatility longer-term. The Case for Staying It bears repeating: these risks don’t mean an investor needs to rush to cash in their Bitcoin. In fact, for a couple of reasons, an investor can believe that both a) Bitcoin will crash again and b) Bitcoin still is worth owning right now. First, the crash may still be a long ways off — and more upside may follow. An analyst could have correctly predicted in early 2017 that BTC was going to crash within a year. A trader who listened to that advice still would have missed out on gains of at least 200%-plus. This rally doesn’t have to end immediately. Second, there’s a case that trying to time the crash (assuming it arrives) is a fool’s errand. Timing the stock market is a notoriously impossible strategy. Bitcoin’s history suggests it isn’t any different. Long-term bulls on Bitcoin (or any other cryptocurrency) can reasonably argue that immense volatility simply is a fact of life, at least for now. But if the long-term bull case plays out, the ability to ride out that immense volatility will pay off, even if there’s some short-term pain along the way. Neither is an unreasonable argument. But crypto holders need to at least understand that we’ve been here before. Short-term bursts of optimism like we’re seeing now almost always are followed by a reversal. I don’t believe this time will be any different, though it remains to be seen how steep that reversal is, and from what point it begins. On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next Potential Winner It doesn’t matter if you have $500 in savings or $5 million. Do this now. #1 Play to Profit from Biden’s Presidency The post Bitcoin Is Going to Crash. The Big Question Is When appeared first on InvestorPlace.

Cryptocurrency This Week: Have India’s Crypto Stakeholders Been Hoodwinked By Govt & More

The prospect of a ban on crypto in India now seems surer, with source-based media reports confirming suspicions about the ban

The Indian government’s crypto paranoia has found expression in letter, again. Everyone knew the bill was coming. They’ve known it since 2019 when a panel headed by then finance secretary Subhash Garg had proposed a draft bill titled, “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019”. Yet, the crypto industry chose to remain optimistic or was perhaps bound by compulsions that came with being an Indian startup in an unregulated space: to always pay lip-service to the government’s supposed generosity and good vision.

“We are confident that the government will bring in positive regulation for cryptocurrency. We are actively engaging with all government agencies to help assuage their concerns about the negative use cases of the technology,” read the templated response from several Indian crypto companies in September last year, when speculations about a ban on crypto during the monsoon session of Parliament were doing the rounds.

Crypto companies had reason to shrug off the speculations then, as the bill wasn’t listed in the Lok Sabha bulletin, which lists the bills to be taken up during a Parliament session. The speculations didn’t prove true and the remainder of the year was witness to the Bitcoin bull run, further solidifying stakeholders’ claims that crypto is the new age asset class with better returns than mutual funds or gold.

Last month, before the start of the ongoing budget session of Parliament, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, found mention in the Lok Sabha bulletin. The synopsis of the bill reads: “To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

Theoretically, we know that the world’s leading cryptocurrencies such as Bitcoin and Ethereum aren’t private but public cryptocurrencies and hence should be exempt from this bill. But we also know that the RBI doesn’t agree with this classification, and had deemed Bitcoin a private cryptocurrency in official communication with stakeholders back in 2018.

Recent source-based media reports have compounded the fears of a crypto ban. According to these reports, the government will ban holding, mining and trading of all cryptocurrencies, but will give investors a three-to-six month transition period when they can sell their crypto assets.

Post the emergence of this source-based scoop, the optimism about regulation for the sector seems to have faded away. “We are waiting for a clear statement from the government on the crypto bill and keeping a close watch on the news for any additional information,” Rahul Pagidipati, CEO at ZebPay told Inc42.

For Zebpay, the passage of the said bill in Parliament could effect the second closure of the company’s India operations. In September 2018, the company had shut its India operations, five months after the Reserve Bank of India (RBI) had barred banks from providing financial services to crypto companies. That RBI banking ban was overturned in March last year, giving crypto in India a lease of life. But it was short-lived, as it seems now.

Do India’s leading crypto exchanges feel hoodwinked by the government as reports about a likely ban emerge. Sumit Gupta, CEO and cofounder of CoinDCX is hoping against hope.

“As the industry awaits the content of the bill, it would be incorrect to suggest that the government is planning to ban cryptocurrency. We are hoping that the government will bring in some sort of regulation in the cryptocurrency industry and will consult stakeholders before going ahead with any move that may have a severe impact on the growing industry,” he told Inc42.

Many experts seem puzzled by the government’s apparent intention to ban crypto, as they feel that its agencies could earn a sizeable amount in GST and tax by regulating the sector. This assertion forms the focal point of a Khaitan and Co and Crebaco Global representation, sent to the government this month, urging it to bring in regulation for the sector.

“We have argued in our representation that the government could earn GST on crypto transactions and income tax on crypto gains. This could be done by bringing crypto exchanges under the purview of the Securities and Exchange Board of India (SEBI). Moreover, our case was never to treat crypto as a form of currency. We need to treat cryptocurrencies as assets, which has been the industry’s position all along,” Rashmi Deshpande, partner at Khaitan and Co told Inc42 about her law firm’s representation to the government.

However, besides the fear of nefarious use cases of cryptocurrencies, the fear of their increased use blunting RBI’s monetary policy and the rupee’s value also persists. Hence, the proposed ban and a plan to introduce a Central Bank Digital Currency (CBDC), which is the digital version of a fiat currency.

There are also reports that the government could use the ordinance route to ensure a smooth passage for the bill. The future of crypto in India looks bleak.

Bitcoin & Ethereum Prices

At the time of writing, Bitcoin was trading at $49,129, up 6.19% in the last seven days. The world’s most valuable cryptocurrency even touched the $50,000 mark.

Ethereum was trading at $1,780, up 1.77% in the last seven days.

Other News

Your Aadhaar May Be The Reason Why India Wants To Ban All Cryptos

The groundwork for a ban on cryptocurrencies may have been unintentionally laid several years ago when the government launched its Jan Dhan-Aadhaar-Mobile trinity in the early years of the first Modi government. Read the full ET story here.

India’s Crypto Investors Weigh Options Ahead Of Impending Ban

The prospect of a fresh ban on cryptocurrencies in India has sent an army of crypto investors scrambling to think of ways to protect or liquidate their holdings. This, as the government, appears to be in final stages of bringing in new legislation governing Bitcoin and other such tokens in India. Read the full BloombergQuint story here.

Almost 200 crypto firms applied to register in the UK over the last year as global interest in bitcoin boomed

Interest in bitcoin and cryptocurrencies has jumped in the UK Eric Gaillard/Reuters

The UK’s watchdog received 199 applications from crypto firms in the year to January.

Bitcoin took off at the end of 2020 and hit a record high of above $50,000 on Tuesday.

The UK regulator said firms must register with it to deal with money laundering.

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Almost 200 cryptocurrency companies applied to register with the UK’s financial regulator over the 12 months, as interest in bitcoin and other digital tokens rose around the world, new figures have shown.

The UK’s Financial Conduct Authority said 199 firms - from Bitcoin ATM operators to online exchanges - had applied to register with it in the year to January after the watchdog tightened its supervision of the sector.

Bitcoin has rocketed in recent days after Elon Musk’s Tesla announced it had snapped up $1.5 billion of the digital currency. More recently, Mastercard and BNY Mellon said they would start offering customers the chance to use cryptocurrencies, adding to the legitimacy of digital coins.

The bitcoin price hit a record high of above $50,000 on Tuesday, taking year-to-date gains to around 70%.

A rise in interest in cryptocurrencies from amateur and professional investors has caught the attention of regulators.

In 2020, the UK’s Treasury said crypto firms had to register with the FCA by January 2021 to ensure they comply with money-laundering regulations.

Figures seen by Insider show that the FCA received 199 applications over the year to January, with the new rules coming into force from January 10. Applications came from big financial names such as Fidelity and Revolut, as well as smaller companies based in Oxford and Glasgow.

Jonathan Rowland, chief executive of London-based bitcoin banking app Mode, told Insider the figures were simply a reflection of the “ongoing adoption of bitcoin and the growth in the audience worldwide.”

He said the UK is “very well-positioned” to take advantage of the bitcoin boom, with high demand from consumers and increasing interest from companies.

Britain’s financial regulator has granted temporary approval to 102 of the companies that applied until July, meaning they can keep serving clients. It has so far officially approved 3 separate firms: Gemini, Archax and Ziglu.

The FCA has sounded warnings about bitcoin and cryptocurrencies, reminding potential buyers to be aware of their high volatility. Bitcoin fell below $4,000 in March 2020, and tumbled from above $19,000 in 2017 to below $3,500 just over a year later.

In January, the watchdog told consumers they could “lose all their money” due to the chance that bitcoin could plunge to next to zero.