Bitcoin: Cryptocurrency to remain volatile until infrastructure ‘up to scratch’ – expert
Bitcoin: Cryptocurrency's value falls sharply in 24 hour period
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Volatility recently wiped trillions off the cryptocurrency market, as moves from Elon Musk and Chinese officials harmed confidence in Bitcoin. The ripple sent shocks down market tables, wiping off an estimated $1.3 trillion. The latest shock isn’t the first time the market has struggled, however, and experts believe it needs to solve infrastructure issues to gain stability.
The two catalysts behind the recent downturn were Elon Musk and Chinese authorities.
The Tesla CEO announced his company would stop accepting Bitcoin as payment for their cars.
On May 12, he told his 52 million-strong Twitter following the decision came following concerns around fossil fuel usage.
Bitcoin’s price started collapsing soon after, eventually caving to $44,000 (£31,079) by May 16.
China later followed late last week, stating it would clamp down on Bitcoin mining and trading.
Financial industry regulators warned payment firms and banks not to offer clients cryptocurrency services.
They cited the currency’s disruption of the “normal economic and financial order” in a statement.
The combination of both factors led Bitcoin to plunge by up to 30 percent, and Ethereum – its closest competitor – 40 percent.
Even Dogecoin, Mr Musk’s cryptocurrency of choice, managed to lose up to 45 percent of its value.
Experts believe the current market volatility will only persist until its solves some inherent infrastructure issues.
Speaking to Express.co.uk, Adrian Patten, co-founder and chairman of Cobalt, a critical risk and settlement infrastructure provider, said celebrity influencers only do so much.
The real issue behind the market’s troubles, according to Mr Patten, is liquidity.
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He said: “The underlying issue behind crypto volatility, is not celebrity entrepreneurs flip-flopping between whether crypto is good or bad, or even comments from regulators; it’s poor liquidity.
“The lack of market infrastructure and settlement processes, and the risk generated from the need to pre-fund positions, mean there isn’t a strong institutional market.
“The only way banks will enter the market at scale, bringing a stabilising influence on the volatility in the process, will be if crypto infrastructure is brought up to scratch.”
Warnings have now emerged that troubles experienced by cryptocurrencies could soon seep into general financial markets.
Peter Boockvar, chief investment officer with Bleakley Advisory Group, told CNBC Bitcoin’s state is “bullying” the market.
He argued the coin also exposes some weaknesses in the stock market’s ground.
Mr Boockvar said: “Bitcoin is a poster child for risk appetite.
“It tells you the stock market is more on uneven ground, if we’re getting dragged along by bitcoin.”
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