Monthly Archives: June 2021

Bitcoin's brief drop below the symbolic price threshold of $30,000 on Tuesday has reignited talk of a crypto winter. It doesn't help that cryptocurrencies like dogecoin, XRP and others saw sharp drops in the last 24 hours.

But experts tell CNBC that bitcoin's fundamentals are good, and the market conditions in 2021 are very different than the last big crypto crash in 2018.

"We are far from a bear market, only traders are freaking out over technicals seen on exchanges like volumes and price action," said popular on-chain analyst and statistician Willy Woo.

Bitcoin's rise in the last 12 months has had a lot to do with the billionaires and corporations that are buying bitcoin in big amounts. The surge in interest from mainstream financial players has not only reformed bitcoin's image but has also fomented a supply shortage, which helped drive up the price of the token.

But since the price of bitcoin peaked over $63,000 in April, the last few months have been rough for the world's biggest cryptocurrency.

China's countrywide crackdown on the nation's bitcoin miners certainly isn't helping.

"Recent news on the China mining shutdown is very reminiscent of China every few years. They've banned banks from using bitcoin, but this is actually different. I've never seen an exodus like this before," said Darin Feinstein, founder of Blockcap, one of the largest bitcoin mining operators in North America.

More than half the world's bitcoin miners are in China, and Beijing has made it clear that it wants them out. In May, the government called for a severe crackdown on bitcoin mining and trading, setting off what's been dubbed "the great mining migration."

"Much of this downward momentum in bitcoin's price has been ascribed to China's latest moves with mining that have led to a lower global hashrate," said Jason Deane, an analyst at Quantum Economics, which specializes in research and analysis on financial markets and cryptocurrency.

"While long-term bitcoiners view this as an extremely positive move for the network ... short-term traders are spooked by uncertainty."

At present, the Fear and Greed Index shows a reading of 10, indicating "extreme fear."

"Markets are often driven by momentum which can sometimes overwhelm fundamentals and the current sentiment seems to reflect that this is what we're seeing here," said Deane.

But Deane and others think it is unlikely to be the start of a so-called crypto winter. Instead, they predict we are headed for a period of overreaction that will correct itself in due course.

"We may never see another crypto winter again," said Mati Greenspan, portfolio manager and Quantum Economics founder. "There's a lot more utility, adoption, and diversification in the industry than we had in 2014 or 2018."

Bitcoin bulls insist the underlying fundamentals of bitcoin are much stronger in 2021, than they were during its last bear market in 2018.

"It's the bitcoin blockchain's more than a decade of unblemished security, bitcoin's breadth of utility, and the level of adoption that establish bitcoin's intrinsic value," said Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.

That last point is particularly important -- bitcoin adoption is on a tear, creating a broader group of users who believe in the currency's value, which reinforces it.

"All the network fundamentals are bullish, most of all we are at all-time highs of new user growth," said Woo.

Bitcoin also recently locked its first major upgrade in four years, promising additional functionality, privacy and efficiency.

Short term, bitcoin believers think crypto prices will stabilize at price levels that are still higher than previous plateaus.

"It definitely fits the pattern of crypto assets rising well above previous all time highs, then settling into a new normal for a few years to come while builders continue to innovate on the technology front," said Auston Bunsen, co-founder and CTO of QuikNode, which provides blockchain infrastructure to developers and companies.

Read more here:
Bitcoin drop below $30,000 sparks fears of another crypto winter here's why bulls aren't worried - CNBC

Fundstrat Global Advisors has issued a word of caution to its bitcoin and crypto investing clients, advising them to take some risk off the table, or hedge their bets, over the weekend, due to brewing concerns about mounting leverage in the nascent market.

We think its possible that the selling weve seen over the last day or so is related to concerns over leverage and counterparty risk of some lenders, wrote David Grider, lead digital asset strategist at Fundstrat. Counterparty risk refers to the possibility that a trading partner runs into trouble and is unable to fulfill obligations usually tied to derivatives contracts.

At last check Saturday, bitcoin BTCUSD, -0.07% was trading down over 4%, changing hands at $31,481.62, but off a low, under $30,000, for the worlds No. 1 crypto put in earlier in the week.

Fundstrat, an independent research shop, co-founded by prominent bitcoin bull Tom Lee, pointed to a Thursday tweet by crypto mogul Barry Silbert, who offered his own words of caution about counterparty risk and leverage in crypto that could potentially translate into further turbulence in digital-asset markets.

Silbert warned that there is a daisy chain of borrowers and lenders in the crypto spaceand warned that it is important to understand counterparty risk and where the weak links in the chain are.

Silbert is considered a luminary in the world of digital assets, after founding two of the most widely known enterprises in crypto: Grayscale Investments, which runs the popular Grayscale Bitcoin Trust GBTC, +5.67%, and the Digital Currency Group, which also owns CoinDesk.

See: Heres how much bitcoin is worth, says JPMorgan, as crypto faces this summer headwind

Worries about leverage in crypto come amid the broad swoon in crypto that has taken down values in bitcoin, as well as Ether ETHUSD, -0.59% on the Ethereum blockchain, and meme assets like dogecoin DOGEUSD, -0.69%.

Bitcoin is down over 50% from its mid-April peak, Ether is off 60% from its all-time high in May and dogecoin is down nearly 70% from its record high achieved early last month.

To be sure, the appeal of those assets is their outsize year-to-date returns, with dogecoin boasting an over 5,000% gain so far in 2021, Ether up more than 140% in the first six months of this year.

But those gains have been significantly pared, with bitcoin up a relatively pedestrian 9% on the year, compared with traditional equity benchmarks the Dow Jones Industrial Average DJIA, -0.44%, the S&P 500 index SPX, +0.23% and the Nasdaq Composite Index COMP, +0.98%, which are all up by at least 11% in the year to date. Bitcoin had been up by more than 100% in the spring.

Cryptos recent downtrend has been partly blamed on a crackdown by China on bitcoin mining and trading, but analysts are also warning that the slump may reveal poor positioning by some investors and the dangerous use of leverage, or borrowed money, to amplify returns.

Fundstrat also warned of potential volatility emanating from some popular crypto lending platforms, who promise hefty returns to those depositing digital assets.

We want to remind clients that crypto lenders are not regulated and insured in the same way as banks are with the [Federal Deposit Insurance Corporation]. The FDIC collects fees from member lenders to provide insurance to depositors in the financial institution runs out of cash.

Read: Dogecoin meme crypto Shiba Inu scores modest fillip from Elon Musk Twitter mention

Depositors have counterparty risk to the lenders and if they go insolvent, they could lose their funds, Fundstrat wrote.

At very worst, we get a run on the banks that causes asset prices fall too far, otherwise good lenders could go underwater. We are not expecting thisBut we dont think its a bad idea to take some risk off the table over the weekend, Grider wrote.

Check out: Elon Musk and Jack Dorsey plan bitcoin chat at July event, and ARK Invests Cathie Wood thinks its brilliant

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Crypto analyst warns of weekend tumble, as bitcoin bull points to 'daisy chain of borrowers and lenders' - MarketWatch

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Bitcoins recent tumble, which has seen it lose more than half its value, took it briefly below $30,000.

Bitcoin has been tumbling for more than three months now, and the move has started to intensify. The cryptocurrency, which is down 54% from its all-time high of $63,237 hit in mid-April, has fallen as much as 24% in the past 5 days. Bitcoin is now up 9.1% in 2021.

Bitcoin was off just over 1% at $32,243 at 1:25 p.m. after trading as low as $28,600

A decline below $30,000 a dangerous sign according to market technicians. Thats where Bitcoin found support in January before quickly racing to its record high. That $30,000 level is particularly important for Bitcoin, as Barrons recently noted, and if it breaks, Bitcoin has a lot more room to drop.

The question is how much. [If] for any reason Bitcoins critical $30,000 support were breached, it would be vulnerable to decline back to $20,000, The Institutional Views Andrew Addison wrote in Barrons back in May. Instinets Frank Cappelleri, notes that the 61.8% retracement of the entire 2020-21 movean important level when using Fibonacci sequences to determine support and resistance, is near 27,200. ICAP Technical Analysis puts the next important support level at $25,000.

And after that? Look out below. If the price falls to $25,000, the price could sink to $6,000, according to ICAP, an almost 80% drop from its current level. That might seem extreme, but history suggests its realistic. After hitting a high in December 2017, Bitcoin fell 83% before beginning the rally that took it to above $60,000 this year.

Still, with Bitcoin bouncing back, maybe history doesnt have to repeat.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

More here:
Bitcoin Is Holding $30,000. Why That's Important. - Barron's

Stocks are moving higher on Thursday, extending gains as markets relax about inflation risks and exact details of whats coming from the U.S. Federal Reserve.

The cryptocurrency market is down significantly on the week, having lost $1 trillion of market capitalization from its peak of $2.5 trillion in early May, said a group of analysts led by Nikolaos Panigirtzoglou at investment bank JPMorgan JPM, +0.18%.

Panigirtzoglou and his team have our call of the day, giving bitcoin a fair value of $23,000 to $35,000 over the medium term, based on the relationship between its volatility and golds, as the crypto faces new headwinds.

The signal of the newest major challenge bitcoin faces, according to the team at the investment bank, is that the discount to the net asset value for the biggest bitcoin fund the Grayscale Bitcoin Trust has widened deep into negative territory.

This reflects the anticipated selling of shares in the trust in the secondary market as a lock-up period for investors ends.

As the six-month lock-up period expires in June and July these investors are likely to sell at least some of their GBTC shares exerting downward pressure on GBTC prices and on bitcoin markets more generally, the analysts said.

More broadly, recent volatility and the boom-and-bust dynamics of crypto represent a barrier to the adoption of crypto markets by institutional investors, Panigirtzoglou and his team said.

The mere rise in volatility, especially relative to gold, is an impediment to further institutional adoption as it reduces the attractiveness of digital gold vs. traditional gold in institutional portfolios, the analysts said.

Based on the idea that institutional investors account for the volatility of assets in allocating capital, Panigirtzoglou and his team use a bitcoin/gold volatility ratio to gauge the valuation of the crypto asset.

JPMorgan views bitcoin as having a theoretical target price of $140,000, based on the convergence of bitcoin volatility with gold GC00, -0.22% volatility and the equalization of bitcoin and gold allocations in investor portfolios.

But bitcoin is headed to the milestone of being six times as volatile as gold, giving it a fair value of one-sixth of $140,000, or $23,000.

The best we can hope for over the medium term is for this volatility ratio to partially revert from around x6 currently to around x4 by year-end, the JPMorgan analysts said. The fair value for bitcoin at four times golds volatility is $35,000.

Needless to say, full convergence or equalization of volatilities or allocations is unlikely in the foreseeable future, Panigirtzoglou and his team said.

The chart

Whats the relationship between bitcoin and stocks?

Michael Batnick of the Irrelevant Investor financial blog said he believes it wasnt a coincidence that people were selling everything at the same time in 2020 stocks, bonds, gold, and crypto but dont bet on a crypto crash taking down equities.

Our chart of the day, courtesy of Batnick, show the correlation between bitcoin and the S&P 500 SPX, +0.23% index.

Sometimes when people talk about noncorrelated assets, what they really want are negatively correlated assets. Such a strategy is difficult to find, Batnick said. With noncorrelated assets, you have to take the bad with the good.

Sometimes bitcoin moves with the stock market, and sometimes it doesnt.

The buzz

Elon Musk said he will look to float satellite internet venture Starlink once its revenue becomes predictable, likely in a few years. Replying to a user on Twitter TWTR, +0.53%, the billionaire chief executive of electric-car maker Tesla TSLA, +2.51% said going public sooner than that would be very painful, noting that he would do his best to give long-term Tesla shareholders preference in an initial public offering.

On the U.S. economic front, 411,000 Americans filed for unemployment last week, just a slight decrease from 418,000 in the week prior and more than the 380,000 expected by economists, while there were 3.39 million continuing jobless claims in the week of June 12. Durable goods orders snapped back in May, to 2.3% from -0.8% in the period prior, as the U.S. advance trade deficit widened 2.8% to $88.1 billion May as imports rose 0.8% to $232.4 billion. The pace of growth for the U.S. economy in the first three months of 2021 was calculated at 6.4% year-over-year, unchanged in the latest revision. And the president of the Richmond Fed, Thomas Barkin, said he thinks U.S. inflation pressures are temporary, but that the Federal Reserve must be careful and the central bank shoul watch prices closely.

Shares in data-management company Confluent are set to begin trading on the Nasdaq, after the Mountain View, California-based group priced its IPO well above its forecast range late Wednesday. Confluent priced its shares at $36 each, above the $29 to $33 range estimated by the company last week.

Financial services company Visa has bought fintech group Tink, an open banking platform, for 1.8 billion ($2.15 billion) from Swedish bank SEB.

John McAfee, the maverick software pioneer who created the antivirus software that bore his name, was found dead in his Spanish jail cell on Wednesday in an apparent suicide. His death came hours after a court approved his extradition to the U.S. to face tax charges, which may have seen him face decades in prison.

The markets

U.S. stocks marched higher by midday DJIA, -0.44% SPX, +0.23% COMP, +0.98%, joining the buoyant performance of European equities SXXP, -0.59% UKX, -0.88% PX1, -0.98% DAX, -0.34% and stocks in Asia NIK, -0.73% HSI, -0.05% SHCOMP, -0.23%, which were firmly in the green.

Random reads

Battle over birdsong: A dispute between two neighbors in suburban England over birds in a tree straddling their property ended with the tree being cut in half.

Dirty clothes to the moon: Astronauts dont do laundry in space they wear clothes until they cant take the smell, and then eject them to burn up in the atmosphere. NASA and detergent maker Tide have joined up to change that.

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Heres how much bitcoin is worth, says JPMorgan, as crypto faces this summer headwind - MarketWatch

NEW DELHI: Major cryptocurrencies were trading with mild gains on Monday. Crypto traders turned cautious over valuations of digital tokens, following volatility in the previous session. Seven out of top 10 digital tokens were trading with gains at 9.30 hours IST, led by Ethereum.

Britain's watchdog Financial Conduct Authority (FCA) ordered cryptocurrency exchange Binance to stop undertaking any regulated activity in the country, saying the firm lacked authorization. The exchange would not be allowed to undertake any regulated activities without the prior written consent of the FCA.

Mexican billionaire Ricardo Salinas Pliego said his banking business may begin using Bitcoin, becoming the country's first bank to start accepting the cryptocurrency. He is ranked as the third richest Mexican with an estimated fortune worth over $15.8 billion.

Prior to this, Bitcoin will become a legal tender in El Salvador, another South American country in September. It is the first nation to elevate the digital token to the status of a currency.

"The major selloff across the crypto spectrum observed last Friday seems to have subsided for now. Volume data from various exchanges show that several investors bought the dip in the markets over the weekend. However, it cannot be termed as a bullish momentum as the markets are clearly range-bound," said Edul Patel, CEO and co-founder, Mudrex.

"BTC began the day at a decent 5 per cent higher over the previous day. Altcoins continue to be under some selling pressure. Overall, the markets can be expected to remain in consolidation for the short term."

In India, where households own more than 25,000 tonnes of gold, investments in crypto grew from about $200 million to nearly $40 billion in the past year, according to Chainalysis.

Tech View by Siddharth Menon, COO WazirXThe Bitcoin chart has formed the double bottom pattern which is known for the trend reversal. RSI breaking the trendline may be a confirmation of the trend reversal.

Crypto veteran Bobby Lee says Bitcoins recent 50 per cent collapse from all-time highs does not mirror market tops of the past and he expects Bitcoin price to see $100K by end of this year.

(Views and recommendations given in this section are the analysts' own and do not represent those of ETMarkets.com. Please consult your financial adviser before taking any position in the asset/s mentioned.)

Originally posted here:
Top cryptocurrency prices today: Bitcoin, Ethereum, Cardano gain up to 5% - Economic Times

Stocks are pushing higher and crypto is surging, as the slow days of summer trading continue to keep the sun shining on financial markets.

It may not last for long.

Our call of the day, from strategists Barry B. Bannister and Thomas R. Carroll at the equity trading desk of investment bank Stifel, is that the S&P 500 is heading for an 11% pullback while bitcoin could fall to $12,000.

The recovery trade that has defined the recent bull market is headed for a further correction in the second half of 2021, the strategists said. Cyclical stocksindustrials, energy, materials, financials, tech, and discretionarywill fall relative to defensive stocks like staples, healthcare, utilities, and real estate, Bannister and Carroll said.

This will weigh down the S&P 500 SPX, +0.23%, and Stifels strategists say that the blue-chip index is heading for an 11% drop to 3,800 points.

The likely catalysts for this major shift, according to the team at the investment bank, are the U.S. PMI Manufacturing Index fading faster than expected in the second half of the year, and the dollar strengthening.

Bannister and Carroll said the primary causes are a slowing global money supply in U.S. dollar termsas central banks ease pandemic-era supportsas well as distortions from quantitative easing, and the lagged effect of Chinas policy tightening.

A sea change of this magnitude will create distinctive winners and losers, the strategists said. Investors can prepare by buying shares in companies focused on defensive industries: pharma and biotech; food and staples retailing; commercial and professional services; food, beverage, and tobacco; utilities; healthcare equipment and services; household products; consumer services; and telecommunications.

But avoid the stocks set to be losers, identified by the team at Stifel as: banks; insurance; software and services; real estate; energy; diversified financials; semiconductors; technology hardware; materials; capital goods; and autos and components.

Other casualties that Bannister and Carroll expect to see are bitcoin BTCUSD, -0.07% and copper HG00, -0.27%, which are both sensitive to slowing global liquidity and the stronger dollar. The strategists at Stifel see bitcoin falling from around $34,000 to $12,000 if global M2a measure of the money supplydrops to low-single digits year-over-year, as they expect.

The buzz

Tesla TSLA, +2.51% is recalling more than 285,000 vehicles in China, including more than 90% of the cars the company makes locally, because of safety risks associated with the cruise control system, the Chinese market regulator said Saturday. The regulator said an investigation found that the Teslas cruise control system could be accidentally activated and potentially result in an unexpected speed increase.

Its a light day on the U.S. economic front. Investors can expect more questions about inflation when the New York Federal Reserve President John Williams speaks at 9:00 a.m. Eastern, before the Dallas Fed publishes Texas manufacturing outlook survey.

More than 150 people remain missing at the site of the condo building that collapsed in Miami, Florida, early last Thursday, with nine people confirmed dead. No one has been pulled alive from the rubble since hours after the collapse on Thursday.

Over the weekend, the U.K.s lead financial regulator banned Binance, one of the worlds most popular crypto exchange networks, in the latest regulatory crackdown on digital assets. But cryptos have shrugged off the news, with the likes of bitcoin, ethereum ETHUSD, -0.59%, and dogecoin DOGEUSD, -0.69% surging.

European-listed shares in Nokia NOKIA, +5.76% jumped more than 6%, catching up the U.S.-listed stocks NOK, -0.92% rally from Friday after investment bank Goldman Sachs upgraded the telecom equipment maker to buy from neutral.

The markets

U.S. stocks were mixed but mostly higher DJIA, -0.44% SPX, +0.23% COMP, +0.98%, while European equities were broadly lower SXXP, -0.59% UKX, -0.88% PX1, -0.98% DAX, -0.34% along with Asian stocks NIK, -0.73% HSI, -0.04% SHCOMP, -0.23%.

The charts

Investor expectations are way out of whack with reality, according to Michael Batnick, of the Irrelevant Investor financial blog.

Our chart of the day, from investment bank Natixis, via Batnick, shows the expectation gap between financial professionals and individual investors in 17 countriesand that American investors expect 17.5% real returns over the long term.

The S&P 500 has returned 10.4% over the long term. The idea that were going to get 17% real, after getting 17% nominal over the last 5 years, is nothing short of absurd, Batnick said.

Moreover, return expectations have continued to rise year-over-year:

Random reads

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Ive never seen that many zeros: A couple from Baton Rouge, Louisiana were the recipients of $50 billion mistakenly deposited into their bank account.

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Buy these stocks as S&P 500 heads for 11% correction and bitcoin risks fall to $12,000, say strategists. - MarketWatch

Jun 24th 2021

THIS WEEK the price of bitcoin briefly dropped below $30,000, more than 50% off its April peak of almost $65,000. Investors are worried by a growing regulatory crackdown against the cryptocurrency. On June 21st China ordered several state-owned banks and Alipay, a fintech giant, to track and block transactions linked to it. Among other things, regulators worry about the environmental damage caused by the mechanism bitcoin uses to verify transactions and put new coins into circulation, known as proof of work (POW). In periods of high activity, as witnessed during much of 2021, bitcoin burns more energy than the whole of Argentina. The glaring inefficiencies of that process also explain why payments in bitcoin are slow and costly, and thus a rarity. That has fed appetite for alternative mechanisms, the most popular of which is dubbed proof of stake (POS). Ether, the second-most popular cryptocurrency after bitcoin, is preparing to switch to it; smaller coins already use it. What is POS, and can it solve bitcoins problems?

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POWs raison dtre lies in that of bitcoin itself. As a decentralised currency, bitcoin lacks a trusted central authority that validates transactions. Instead it relies on a public consensus mechanism where each block of transactions is validated by someone on the network and then verified by everyone else. Miners put blocks together by picking pending transactions from a pool, ascertaining they are legitimate by checking, for example, that bitcoins are being spent by their true owner. To earn the right to add their block to the blockchainthe database that records transactionsminers compete to be the first to solve a complex numerical problem using super-fast computers. The one who does gets rewarded in new bitcoins. This sucks up huge amounts of energy, making POW both an ecological disaster and a crummy verification method (bitcoin can only process around seven transactions per second).

POS is an alternative consensus mechanism which doles out rewards based not on who first solves a mathematical puzzle but how much has been staked by competing validators. To earn the chance to validate transactions, network users must place coins in a specific digital wallet, where that sumthe stakewill remain frozen until the block of transactions is processed. Instead of paying out to those with the most computing power, POS picks winners randomly, with the probability of being chosen linked to the amount staked. Unlike POW, which pays miners with both a reward every time they create a new block and a fee per transaction, POS only does the latter. All this means the process requires far less equipment and energy than POW. Validators are incentivised to keep the network secure: the more they stake, the more they earn, but the more they also stand to lose if they try to hack the network or validate fraudulent transactions.

But POS has downsides too. It is less effective at putting new currency into circulation. It also encourages hoarding, since the probability of earning big fees rises in tandem with how much is held in escrow wallets, rather than spent in transactions. That is bad for a currencys availability and liquidity, which limits its usefulness and makes its value even more volatile. It could also end up concentrating validating powers in fewer and fewer hands, defeating the purpose of decentralisation. In POW, by contrast, miners are encouraged not to cling on to their crypto, since to engage in the mining arms race they constantly need fresh real-world funds to upgrade their hardware. This unsatisfactory state of affairs has led to a mushrooming of hybrid protocols, such as proof of activity or proof of burn. Others, such as proof of capacity, which rewards users based on how much space they have on their hard drives, use different methods. But none of them has yet managed to steal POWs crown, and with it knock bitcoin off the top spot.

Dig deeper:The boundary between crypto and fiat money is becoming more permeableIs the financial establishment coming round to bitcoin?Special report: The future of banking

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The Economist explains Can bitcoin be bettered? - The Economist

Chesnot/Getty

Bitcoin broke in the New Year in a particularly powerful way: By breaking the $30,000 price barrier for the first time. That was a sign of the good times to come, as by March its price was popping over $60,000. But, as they say, what goes up...

On Tuesday morning, Bitcoin dipped under $30,000 for the first time this year. It followed Monday's news that China, which has long had a softly enforced ban on cryptocurrency, is getting serious about cracking down on cryptocurrencies. Social media was awash with observers pointing out that 2021's price gains have for now been neutralized.

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The price has since rebounded, to just under $34,000 at the time of writing.

Bitcoin wasn't alone, however. Ether, the second biggest cryptocurrency, fell to $1,730, its lowest price since the end of March. DogeCoin dipped to 17 cents, under a quarter of its all-time high of 73 cents. Both have also rebounded slightly, with Ether at $1,975 and DogeCoin at 19.8 cents. For reference, Ether's all-time high is $4,132.

It's the second slump caused by China's regulators this year. In May, Chinese officials reaffirmed an old ban that forbids financial firms from actively aiding in the mining and selling of cryptocurrencies. It caused a big dip, but crypto enthusiasts shrugged that the ban is nothing new. It was enshrined in 2013 and then sparsely enforced.

Now playing: Watch this: Why cryptocurrency took a hit

3:37

On Monday, however, moves made by China indicated the law would be enforced much more seriously. Key banks and financial services companies like Alipay attended a meeting by China's central bank, the South China Morning Post reports, where they were told to crack down on cryptocurrency trading. It came days after regional authorities ordered the closure of 26 mining operations in Sichuan.

"Virtual currency transactions and speculative activity have disrupted the normal order of the economy and financial [system]," thecentral bank said in a statement on its website. "They increase the risks of illegal cross-border transfers of assets and illegal activities such as money laundering. "

The decentralized nature of cryptocurrency is anathema to the Chinese Communist Party's focus on stability -- and control. Though shunning Bitcoin, Ethereum and other cryptocurrencies, China is working on rolling out its very own digital currency, the e-yuan.

Bitcoin enthusiasts are comparing the cryptocurrency to Google, whose share price continued to flourish after being banned in the People's Republic in 2010. They say that China neglects cryptocurrencies at its own peril, and that this will be a long-term positive for the US.

Dogecoin holders are less tranquil. The memecoin entered the year being valued at less than a cent and was pumped by Elon Musk and an ironic internet movement hoping to boost it to 10 cents -- similar to the movement trying to get GameStop's stock to $1,000. The 10-cent target was met in April, and then thoroughly eclipsed in the month that followed. With hype building around a potential announcement from Musk at SNL, the memecoin hit 73 cents. After Musk referred to Dogecoin as "a hustle" on the show, its value plummeted, a trend that's continued for the past month.

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Bitcoin falls below $30,000 after China's crackdown: Everything you need to know - CNET

Illustration by Sjoerd van Leeuwen

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Canada is planting 30 million trees this season. The purpose is to build a powerful carbon sink.

Carbon is not the only thing that modernity produces in excess. There is a surfeit of capital. Absorbing it has become a major challenge and threatens financial stability. There are more than $13 trillion of negative-yielding bonds in the world. Despite claims of exorbitant privilege, the U.S. government pays about 1.5% interest to borrow for a decade, historically low and below the Federal Reserves inflation target. Japan and Germany, the next largest market economies, can borrow at considerably lower rates. Germany charges investors nearly 20 basis points, or 0.2%, annually for the privilege of lending to it. It is not coincidental that cryptocurrencies were born in an age in which savings are abundant.

Capital is subject to the same law of supply and demand as other sectors of society. Capital is cheap because it is abundant. Large companies have more money than they know what to do with, so they return it to shareholders in stock buybacks and dividends. The drive to improve returns fuels mergers and acquisitions.

Equity valuations are stretched. House prices in many countries are rising quickly. Credit spreads, which measure how much one is paid for a unit of risk, are historically tight.

Excess capacity is another expression of surplus savings, that is, overinvestment. The U.S. economy is roughly the size it was on the eve of the pandemic. Yet around 7.5 million fewer people are working. Despite a booming economy, the U.S. is using a little more than three-quarters of its industrial capacity. Even at the end of 2019, it was just above 76%.

Capital is abundant because market-based economies are huge wealth creators. By applying science to production and finance, capitalism has been incredibly successful. And it turns out that to succeed, capitalism does not need to permit slavery, employ children, or deny women the right to vote. It can provide unemployment insurance, social security, and head-start services without being dictated to or sacrificing personal liberty. Its plasticity confounds critics. It can be reformed.

However, capitalisms biggest weakness grows out of its most powerful strength, one that cannot be reformed away. It produces wealth on levels heretofore inconceivable. We live in an epoch that King Midas would recognize. We are choking on our wealth. Even if one does not recognize the disease (the idea of surplus capital is still controversial in some circles), the symptoms are undeniable. The return to capital is low, whether it is interest rates or profit margins. Redundant investment (excess capacity) is another symptom. Efforts to rationalize industries are part of the M&A wave. Corporations have become net providers of capital, no longer net borrowers. Speculation is extensive, and the gamification of investing began long before Robinhood and the legalization of sports betting in the U.S.

If we will not address the underlying distributional issues and the disparity of income, wealth, and power, then we need to channel the surplus savings away from those expressions that help fuel economic and political instability. What is needed is a vehicle that does to savings what trees do to carbon. Voil! Enter crypto.

Some diehards continue to insist that crypto is money. El Salvadors President Nayib Bukele recently pushed through plans to recognize Bitcoin as legal tender. More than two-thirds of the nations population lacks bank accounts or credit cards. Bitcoin rose about 270% from mid-December to mid-April and has since been halved. Volatility makes this a dangerous experiment. Lets see if it lasts longer than Teslas offer to sell cars for Bitcoin.

Perhaps the function of crypto is to redirect savings from lifting equities to even more stretched values, or pushing nominal and real rates lower, or creatively destroying goodwill in acquisitions. Some have said that blockchain was a solution looking for a problem. The problem that crypto may attempt to address is the need for a new asset to absorb the wealth in a nonthreatening, ideologically safe way.

Crypto was born during a period of great concentrations of wealth, and it cannot help but reflect that origin. Despite the talk of decentralized finance, ownership of crypto, let alone trading, appears highly concentrated. One recent study found that more than 72% of Bitcoins (now about $33,000 each) are owned by those with 100 or more Bitcoins, along with miners and brokers. Nearly 32% are owned by those with 1,000 or more Bitcoins. A recent survey by Gemini, a crypto exchange, found that the average crypto trader was a 38-year-old male whose household made about $111,000, roughly 60% more than the median family income in the US.

The volatility and environmental issues of some models (proof-of-work) suggest that even as a centralized store of value, cryptos role as a savings trap may be limited. It will not solve the challenge of capitalisms unparalleled ability to produce wealth. The current steep decline in the face of strong price pressures weakens arguments of a hedge against inflation and as store of value. Ultimately, crypto is another expression of the surfeit of capital.

Marc Chandler is chief market strategist, Bannockburn Global Forex.

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Bitcoin Wont Solve the Problems of a Society That Is Overproducing Capital - Barron's

Bitcoin, the worlds No. 1 cryptocurrency, fell to its lowest level since January on Tuesday, extending a price drop that has wiped out more than $1.3 trillion in market value for the broader crypto complex since a peak in May.

After falling as low as $29,083 on Tuesday morning, bitcoin BTCUSD, -0.07% was changing hands at nearly $32,000 by Tuesday evening, according to CoinDesk data. The days nadir marked its lowest price and its first breach of the psychologically significant $30,000 level since January, according to Dow Jones Market Data. Bitcoin is down more than 50% from its mid-April peak, paring its year-to-date gain to 10.4%.

Ether coin ETHUSD, -0.59% on the Ethereum blockchain, the No. 2 most valued crypto, was deepening a slide below $2,000 and trading at $1,874 on Tuesday evening. Ether is down about 60% from its peak, though it is up 150% on the year to date.

Bitcoinhas violated an important support level and it is likely that we may see more panic in the market as investors will think that it may be the end ofBitcoin, wrote Naeem Aslam, chief market analyst at AvaTrade in a Tuesday note.

But investors should remember thatBitcoinis a kind of asset which has fought many similar pessimistic views many times. The current sell off could be the opportunity for many investors to load their portfolio withBitcoinwhich is selling at a huge discount, the analyst wrote.

Meanwhile, dogecoin DOGEUSD, -0.69%, the popular meme asset, was changing hands at around 19 cents, 2 cents above its daily low and down 75% from its early May peak.

The decline for the crypto has been attributed to regulatory action by China, where regulators have imposed restrictions on digital mining and trading of crypto in the Peoples Republic.

Cryptos price correction also comes as traditional markets are trying to recover from a brutal selloff last week. The Dow Jones Industrial Average DJIA, -0.44%, the S&P 500 index SPX, +0.23% and the Nasdaq Composite Index COMP, +0.98% saw a powerful rebound from last weeks slide on Monday as digital assets sank, leading some analysts to speculate that bitcoin might be experiencing a rotation out of the crypto and into equities.

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Bitcoin breaks below $30,000 for first time since January and 'it is likely we may see more panic in the market' - MarketWatch