Storm clouds around cryptocurrencies. The price is collapsing in international markets, although experts continue to ensure that institutional investors (and retail investors) continue to enter the market. In any case, the obvious thing was the reduction of more than 7% registered at some point this Monday, in the context of strong international instability with the threat of war in Ukraine and the fear that Russia’s operations with cryptocurrencies, including mining, will prohibit. , issuance, circulation and exchange. Bitcoin, the cryptocurrency with the largest capital, has lost half its value in less than three months, from the highs of early November.
It is beginning to be verified that bitcoin as a refuge value deserves a failure, except in uncertain economies with high inflation. Experts attribute the evolution of the price to the fear of the effect of the subsequent rises in interest rates in the United States and the restrictions on its use in Russia and China. Being on the edge of legal spaces is one and quite another thing to enter the space of illegality in large parts of the world. In an advisory report, Russia’s central bank last week urged Russian authorities to implement a series of amendments to the law to “reduce the risks associated with the spread of cryptocurrencies.” The bank saw as a “systemic threat” the growing interest of Russians in this type of currency, as well as the increase in accounts and the high risk of operations with cryptocurrencies. The proposal comes at complex times.
Victoria Gago, co-founder of the European Blockchain Convention in Barcelona, recalls that the ups and downs in the price of bitcoin are not new: “This is the seventh time that bitcoin has lost half its price in the markets since 2012, but new large investor institutions enter each month with clear support for cryptocurrency, “he explains. His vision differs from the short-term intuition and he assures that this is a good opportunity to buy Bitcoin again after the high prices reached late last year.
The Russian factor that caused sales is also in line with interest rate hikes in the US, which are usually correlated with declines in the price of bitcoin. It’s early to draw conclusions, but that alleged role of bitcoin’s hidden value is seriously in doubt. This is not about digital gold. The precious metal is much more stable in its price amid inflationary unrest and war tensions in the West (with a price above 1,600 euros per ounce; about 40,000 euros per kilogram).
Proponents of cryptocurrency hold on to the hope that much of the current capitalist system has embraced cryptocurrencies as interesting speculative assets. This past weekend, it became known that the Blackrock investment fund will enter the cryptocurrency environment through an ETF index or hybrid exchange traded fund (equity-based fund) linked to the blockchain market. The Blackrock-backed index will refer to the investment results of the NYSE FactSet Global Blockchain Technologies Index, which is based on companies involved in the development and implementation of crypto-technologies in the US and abroad. The proposed fund plans to invest at least 80% of its assets in equities included in the index, according to a document published by specialized press. You can allocate up to 20% on futures, options, swaps, cash and cash equivalents, all on shares. The fund will not invest directly or indirectly in crypto through crypto-derivative instruments.
Blackrock CEO Larry Fink told CNBC in October that while he sees “enormous opportunities” for the digital currency, he is unsure how the crypto-space will fare in the long run. This is another example that blockchain support should not be confused with safe bets on general revaluation in the case of cryptocurrencies. They are currently an asset class, but in the long run investors are not sure of the economic role they will play in the future or which will be accepted by the market.
Banning the issuance and circulation of cryptocurrencies (including digital exchanges and P2P platforms) in Russia could have a very negative effect on the price. In the short term due to the selling pressure of the current Russian holders. But it can also have the effect of increasing the activity of intermediaries taking over the property from those anonymous investors besieged by a hostile local legal framework. According to the report of the Russian Central Bank, the total amount of operations of Russian natural persons linked to cryptocurrencies could amount to 350 000 million rubles per year (5 000 million dollars). Any move between those cryptocurrency owners could have short-term price effects.