- June 27, 2021
- Posted by: Trading
- Category: News
Bitcoin gained 3.53% against the US dollar yesterday, gaining ground for the second consecutive day and closing the session at the 33,703.0 level. In weekly terms, Bitcoin went down by 7.82% against the greenback, giving up all the gains it made in the previous week.
This week, Bitcoin finally dropped below the 30,000 level, considered by many a psychological barrier, and erased all of the gains it made since the beginning of the year. However, this turned out to be a short-lived event, as it broke again above the 30,000 level directly after.
Bitcoin has suffered from strong volatility since the beginning of the year. On one hand, some important market players announced their willingness to adopt the cryptocurrency and to offer it to their clients. On the other hand, some governments have either signaled their willingness to regulate Bitcoin or are currently attempting to advance efforts to restrict Bitcoin mining given its negative effects on the environment.
One of the most remarkable events that could explain the current instability in the markets is Tesla’s decision to stop receiving payments in Bitcoin due to environmental concerns. Previously, Tesla’s CEO Elon Musk had expressed his enthusiasm for crypto alternatives, especially Dogecoin, on his Twitter account.
Another event that has been affecting Bitcoin’s performance is the Chinese government’s decision to order crypto miners to shut down their operations. The Chinese government also claimed this was due to environmental concerns, especially given China’s aspiration to become carbon neutral by 2060 and current efforts to hit peak emissions by 2030.
“Much of this downward momentum in Bitcoin’s price has been ascribed to China’s latest moves with mining that have led to a lower global hash rate,” commented an analyst at Quantum economics. “While long-term Bitcoiners view this as an extremely positive move for the network … short-term traders are spooked by uncertainty.”
Despite those setbacks, there is still enthusiasm for Bitcoin in the markets. Inflation levels have been rising across the world, which makes alternatives to fiat currencies more attractive. It is believed that Bitcoin, just like gold, is a good hedge against inflation, though there are still doubts regarding its status as a currency.
The Federal Reserve commented that the rise in inflation is related to the pandemic, so it is expected to be short-lived. However, many believe that it is linked to the size of Biden’s stimulus plans and to the Fed’s ultra-loose monetary policy stance.