Friday, January 21

Bitcoin stabilizes somewhat after the price collapse

However, the nervousness of investors in the financial markets overall remains high with a view to the corona virus, the problems of the highly indebted Chinese real estate company Evergrande and the US Federal Reserve’s soon to be somewhat less generous monetary policy. In addition, an important hearing from managers of cryptocurrency companies in the US House of Representatives is due in the new week.

On Sunday morning, a Bitcoin on the Bitstamp trading platform cost around 49,500 US dollars, roughly as much as on Saturday evening. Early on Saturday, the rate of the largest and best-known digital currency fell by around a fifth to just under 42,000 dollars in less than an hour. Ether, the second largest digital currency after Bitcoin, showed a similar price trend.

According to experts, a precise reason for the sudden drop in the Bitcoin price was not immediately apparent. One referred to the sometimes larger fluctuations in crypto money, especially on the weekend – in less liquid markets. If individual investors then sell off larger positions, this can put a lot of pressure on the price.

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In addition, there is currently a somewhat tense mood on the financial markets. The reasons are the uncertainty about the consequences of the spread of the omicron variant of the coronavirus and the expectation that the Fed – forced by high inflation – will be able to reduce its bond purchases to support the economy during the corona crisis more quickly than expected recently.

In addition, sentiment was depressed over the weekend by a warning from the Chinese real estate giant Evergrande of possible financial difficulties. The group has been in a deep crisis for months and is considered the world’s most heavily indebted real estate company. There is an urgent need to raise funds in order to be able to pay banks, suppliers and bondholders on time. The company is so large that some experts fear a “risk of contagion” for China’s economy and beyond.

Against this background, the stock markets could also come under further pressure. The broker IG valued the German leading index DAX and the US leading index Dow Jones Industrial on Sunday below their closing levels on Friday.

In the new week, however, the gaze of crypto investors will also be directed to a hearing from the heads of companies in the field, such as the Coinbase trading platform, before a committee of the US House of Representatives. It is on the agenda on Wednesday.

The fear of forced regulation of Bitcoin & Co could weigh on the industry, at least for a short time, if those responsible should speak out in favor of stricter regulation, explained analyst Timo Emden from Emden Research. Regulation in the USA in particular could have a significant impact on prices. However, even if a harder approach would initially be negative, it is necessary so that cryptocurrencies can mature as a serious asset class. And that would be positive in the end.

/ mis


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