Blood, Sweat and Tears had it right: What goes up, must come down.
Bitcoin’s slide, ongoing as of this writing, must have stalwarts wistful, as the 800-pound gorilla in cryptos is down about 14 percent in just the last week alone. At its recent $32,000+, we’re left wondering whether the $30,000 level may be breached. We’re a long way, it seems, from bitcoin’s recent zenith above $60,000, when enthusiasts were touting $100,000 and above.
Investors’ psychology (and speculators’ psychology) tends to like round numbers. And should bitcoin dip below $30,000, the digital offering may have trouble finding support. Volatility is one thing, whipsawing is something else – and in Wall Street parlance, it may (or may not) be the case that “weak hands” are being “shaken out.”
Now, that’s on a trading basis. It’s important to point out that the fundamentals, as measured by the most recent headlines, point to turbulence ahead. On the one hand, as noted in this space, bitcoin is getting a warm embrace from El Salvador. Just this week, the president of that country said he would introduce legislation that would treat bitcoin as legal tender, right alongside the official national currency, the U.S. dollar.
PYMNTS noted this week that the introduction of bitcoin would bring into El Salvadore’s mainstream commerce a currency that has no underlying asset – or peg, or band – to compete against the dollar. It might be a grand experiment that lends validation to bitcoin – but the practice of using the crypto itself may have friction built-in, given the wild price swings that are evident even at this very moment.
But then there’s the flip side of the (digital) coin. We live in a world where Elon Musk tweets an emoji (a broken heart) and bitcoin sinks. We live in a world where El Salvador embraces bitcoin, but the economic juggernaut that is China can put guardrails around its digital yuan, in part by banning cryptos from being part of the financial services landscape. The recovery of millions of dollars’ worth of cryptocurrency that was recently paid as ransom to the hackers of the Colonial Pipeline could mean that bitcoin is not as anonymous as some cybercriminals might hope. That might mean the thieves are fleeing crypto, too – which would be a good thing. But for crypto, at least right now – and especially for bitcoin – it’s a case of “look out below.”