Considered the best investment of 2020, bitcoin started 2021 in a solid way and reached the unprecedented price of US$ 65,000 in April. At that time, the asset's appreciation in the year was approximately 114%.
But with the arrival of May, the digital currency took a real hit. Factors such as the trade war between China and the United States, global regulatory pressures and environmental issues caused bitcoin to drop 36 percent over the month, culminating in the worst period for cryptocurrency in nearly 10 years.
The asset was expected to show some recovery in June, after the storm, but that is not what happened. So much so that bitcoin ended June quoted at just over US$ 34,000 — far below the value reached in April.
In light of recent cases, the market is now apprehensive about the future of bitcoin. Admittedly, it's almost impossible to predict the future of such a volatile asset, but it's important to consider some risks before betting everything on a possible recovery.
Although the asset has been adopted as El Salvador's local currency—which is seen as a positive point—the cryptocurrency has faced several individual restrictions around the world as there is no centralized regulatory body.
In May, for example, China banned the country's financial institutions and payment companies from providing services related to cryptocurrency transactions.
To make matters worse, the Asian country reinforced the fight against digital currency mining by banning the activity in the southwest of the country.
The US Treasury Department now requires that any transfer of cryptocurrencies equal to or greater than $10,000 be reported to the IRS, the US Federal Revenue Service.
The UK, for its part, banned Binance, the world's largest cryptocurrency exchange, from carrying out regulated activities in the region. Thailand has banned cryptocurrencies memes and various tokens, and India is considering banning its country's digital currencies, including the application of fines in cases of possession or transactions of these assets.
Naturally, all these moves put the future of bitcoin in check and, it seems, as long as there is no centralized regulator — in addition to greater security for the sector — operations with the asset should be a "flea behind the ear" for the investors.
Precisely due to the lack of a regulator on the price of cryptocurrency, the oscillation of bitcoin is almost a certainty. But this has its good side and its bad side: while investors can accumulate robust gains, losses can drive these players away from the universe of cryptoactives.
In fact, precisely because of the uncertainties, it is feared that bitcoin negotiations will slow down in the coming months.
But for Ross Middleton, chief financial officer of the decentralized finance platform DeversiFi, volatility should not pose a barrier to institutional adoption.
According to a statement to CNBC, the executive believes that volatility "may actually be a significant attraction, as the potential for large price movements means that funds can make significant profits with a relatively small allocation compared to the size of their overall portfolio" .
This means that, even if bitcoin moves sideways from now on, the market perception will be of a base consolidation of the asset, which can provide greater security for investors.
Stablecoins were created with the aim of reducing the volatility of cryptocurrencies, equating them with stable assets such as the dollar and gold.
Its operations allow, for example, to transfer investments in bitcoin to a stablecoin when there is a downside perspective.
In this way, by keeping currency investments stable, losses would be reduced.
But last week, the chairman of the Federal Reserve Bank of Boston, Eric Rosengren, said tether, one of the largest stablecoins on the market, poses a risk to financial stability, as there is fear that the cryptoactive has no reserves. enough to justify its indexation to the dollar.
And with the siege of stable currencies, bitcoin volatility could also be affected — as there is longstanding concern that tether is being used to manipulate the price of the world's most traded cryptocurrency.
Because of this, fears about “what is the concrete value” of an asset and “what is speculation” tend to increase.
Speaking of speculation, the increasing appreciation of cryptocurrencies meme like dogecoin and SHIBA INU also casts doubt on the real value of cryptocurrencies in general.
The strong influence of Elon Musk has sparked recent dogecoin highs. Even, at one point, the asset came to be worth more than Ford and other large American companies. This attracted a number of newcomers to the market who were aiming for astronomical gains.
The growth of meme cryptocurrencies provoked the adhesion of new investors to the market. Photo: Rafael Tozzi/Shutterstock
And with the growing adhesion of investors in the universe of cryptocurrencies, the scams also grew. Cybercriminals see a “promising” market for their scams, as there is no single market regulator and the scenario involves large currency transactions.
In early June, the US managed to recover about $2.3 million in bitcoins after a cyber attack. Despite the rescue, the occurrence served to reinforce fears related to the security of cryptoactives.
One of the alternatives would be government intervention in cases of investors “burned” from the market due to scams. However, this means greater regulation of cryptocurrencies, which should interfere with the free price of these assets.
Another fear about the future of bitcoin stems from its high energy demand and damage to nature. No wonder Tesla, owned by billionaire Elon Musk, stopped accepting payments in cryptocurrencies for the purchase of its vehicles.
The giant justifies the action for fear that the use of bitcoin could result in an increase in consumption of energy and fossil fuels. And, well, the company is right.
According to an analysis by researchers at Cambridge University, in England, bitcoin mining consumes a greater volume of energy than that of countries such as Argentina, the Netherlands and the United Arab Emirates.
The concerns are such that last month the Bitcoin Mining Council (BMC) was created, a council — from which Elon Musk was left out — to “promote transparency in [asset] energy use and accelerate sustainability initiatives in Worldwide".
The problem is that, as the bitcoin trades increase, energy consumption and mining, of course, also increase. And this goes in the opposite direction to sustainability goals, one of the most debated topics currently by investors and global companies.
From this summary of the roller coaster that bitcoin goes through, it leads to the other seats on the train, Ether, Litecoin and others, which depend on indexing with bitcoin.
And, in the last chairs, are all those who invest in the main world cryptocurrencies!
Hold on to the bench and start preparing psychologically!
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