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Bitcoin Cautiously Reverses Decline After Recent Slump

January 26, 2022

Bitcoin climbed cautiously higher on Wednesday, after a recent slump across the wider cryptocurrency market, as investors shift away from riskier assets.

The coin was almost 4% higher on the day at $37,794 (£27,991), while ethereum, the second-largest cryptocurrency, was 3.4% up.

Although it remains the world’s biggest cryptocurrency by market value, since the start of this year bitcoin has fallen more than 20%, and is down around 45% from its all-time high of $69,000 last year.
The move lower also pulled down the shares in companies whose revenues are tied to the cryptocurrency and blockchain market.
“This looks like a crash for now,” Michael Every, global strategist at Rabobank, said in a note this week.
The cryptocurrency market recently has been affected by a string of regulatory bodies around the world moving to tighten rules on how digital assets are traded and advertised.

Last week the UK Treasury department, following in the footsteps of Spain and Singapore, said crytpo ads will be brought into line with other financial advertising to ensure they are both fair and clear.

This means the promotion of qualifying cryptoassets will be subject to Financial Conduct Authority (FCA) rules, in line with the same standards that other financial promotions such as stocks, shares, and insurance products are held to.

Rising inflation has also meant that traders have instead been turning to safe-haven assets such as gold and the US dollar, losing their appetite for risk.

It comes as US markets in general have also been weaker so far this year, with the Dow Jones (^DJI) shedding 5.6%, the S&P 500 (^GSPC) down 8.6% and the Nasdaq (^IXIC) losing 13.5%.

Investors are expecting central banks across the globe to rein in their stimulus programmes. Higher interest rates make riskier investments less desirable since it increases the returns traders can earn from holding top-quality securities such as US government bonds.

Earlier this week, UBS (UBSG.SW) warned of a looming “crypto winter” as the US Federal Reserve looks to possibly raise interest rates.

Switzerland’s largest bank said if central banks move to get a handle on inflation, investors may not be holding bitcoin as protection against rising prices. They noted that government stimulus was a key factor boosting the prices of cryptocurrencies in 2020 and 2021.

The UBS analysts also claimed that some investors are increasingly realising that bitcoin is not “better money” because of its high volatility, while the cryptocurrency’s limited supply makes it inflexible as a currency.


























































SOURCE: Yahoo Finance

Image Source: Pixabay.com