2 min read . Updated: 26 Jun 2021, 02:26 PM IST Bloomberg
Bitcoin has halved from a peak near $65,000 in April, hurt by a cryptocurrency clampdown in China, tightening regulatory scrutiny elsewhere and concerns that the servers underpinning the virtual coin consume too much energy
Strategists are struggling to see a turnaround ahead for Bitcoin, at least for now, as the digital coin hovers around the $30,000 level.
The near-term setup is “challenging,” a JPMorgan Chase & Co. team including Josh Younger and Veronica Mejia Bustamante wrote in a note Friday, while Fundstrat Global Advisors LLC’s David Grider recommended reducing risk or buying some protection.
The JPMorgan team said blockchain data suggests recent cryptocurrency sales were made to cover losses and that “there is likely still an overhang of underwater positions which need to be cleared through the market.”
Bitcoin has halved from a peak near $65,000 in April, hurt by a cryptocurrency clampdown in China, tightening regulatory scrutiny elsewhere and concerns that the servers underpinning the virtual coin consume too much energy. The prospect of reduced emergency stimulus amid the recovery from the pandemic has also emerged as a possible obstacle for the most speculative investments.
Still, the JPMorgan strategists pointed to stability in the Bitcoin futures market as a positive factor, alongside the possibility of increased production costs as China’s crackdown pushes Bitcoin mining abroad. Some researchers argue the marginal production cost plays an important role in Bitcoin prices.
So while the “cryptocurrency market shows signs that it is not yet healthy, it does also appear to be beginning the process of healing,” they wrote.
The largest cryptocurrency fell as much as 6% to $30,296 on Saturday after dropping almost 8% on Friday. Other coins were also under pressure, with Ether dropping more than 5%. Some chart watchers view the $30,000 level as key for Bitcoin, contending a decline below it could open the way to retreat to $20,000.
Grider, lead digital asset strategist at Fundstrat, noted that a large short position has been building again on the crypto exchange Bitfinex — and said the last time there was a similar situation, negative news out of China took prices lower.
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