It's been a cold, hard crypto winter. But signs of a thaw, spurred on by global currency chaos, are beginning to appear.
What's going on: Bitcoin rose to its highest level in more than a week on Tuesday, gaining more than 5% as the British pound and other currencies took a beating against the ultra-strong dollar. The recent gains gave crypto bulls hope that bitcoin was becoming a safe haven asset, or one that acts as a hedge when stocks are falling.
Then, around midday, the dollar grew in strength and bitcoin came crashing down again, wiping out all of its recent gains. Bitcoin slipped about another 1% Wednesday after the Bank of England tried to shore up UK debt.
When the dollar is strong, "there are no safe havens," warned Glen Goodman, eToro crypto consultant, on CoinDesk TV Tuesday.
Some background: Bitcoin is struggling for direction: The digital currency has been swinging between $18,000 and $25,000 since mid-June after a massive crash wiped nearly $2 trillion away from the crypto market. It is currently down 60% year-to-date.
The coin soared through the Covid-era on the wings of near-zero interest rates, stimulus cash and a big influx of investors from large-scale institutions and reached a record high of nearly $70,000 in November.
Then, central banks started raising rates to fight inflation, and the dollar strengthened significantly, seducing investors as the ultimate safe haven. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves. The crash caused a wave of bankruptcies among young companies like crypto trading platforms, Voyager and Celsius.
"In the current macro climate, when you have inflation and a huge sell-off and major crypto projects that failed, people are going to pull back," Tyler Winklevoss, co-founder of the crypto exchange platform Gemini, told me in an interview earlier this month. "Bitcoin is still new so it's still viewed by many as a risk-on asset. And as people pull risk off the table, bitcoin will suffer. But all assets are suffering, bitcoin isn't in this alone."
The silver lining: But even as bitcoin prices fall, investors see signs of a bottom.
Ben Gagnon, chief mining officer at Bitfarms sees anything below $20,000 as the price where fair-weather institutional investors retreat from the currency for good, which will help stabilize bitcoin's current volatility and send it up an upward path.
As of Wednesday morning, bitcoin was sitting below $19,000.
"I'd be very surprised if we ended the year this low," said Gagnon. "I think Bitcoin is going to start to recover now that it's kind of shaken out of a lot of the excess."
"This is an interesting time," said Chris Kline, COO and co-founder of Bitcoin IRA, a digital asset technology platform. "For the last eight months, bitcoin has been acting like a tech stock because there have been so many institutional investors in it." As that money floods out, he said, things could change.
It's a big TBD, but bitcoin advocates remain cautiously optimistic.
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