Five reasons why bitcoin remains below $ 50,000

On September 8, Standard Chartered’s cryptocurrency research team projected that the price of bitcoin could reach $ 100,000 in the last days of 2021 or in the first months of 2022. Some CEOs of the crypto segment have also made similar predictions, as well as Thomas Lee, managing partner of Fundstrat Global Advisors.

However, with more than one break at the moment for the end of the $ 50,000 in the first week of September, bitcoin has failed to generate any bullish momentum. At the close of this release, its price is hovering around $ 41,698, oscillating between the support of $ 41,000 and the level of resistance seeking $ 50,000. So what is causing this downward pressure?

1. DeFi continues to grow exponentially

The theme goes back to last year. During the mayor’s part of 2020 the decentralized secondary (DeFi) sector recorded one volume of unprecedented operations and many miles of cryptocurrency users locating their assets in multiple DeFi protocols with the end of high-yield generating returns. It was to be expected, consequently, that many investors would turn their holdings of bitcoin into ether or other tokens backed by smart contracts to participate in that way.

Although there has been a momentary drop in DeFi-related activities in the latter part of 2020 as early as 2021, the sector has experienced a second wave of investment in recent months, as non-fungible tokens (NFTs) stand out. ) began to gain prominence. On September 7, the total value of blocked assets (TVL) in DeFi almost exceeded the $ 100,000 million mark for the first time, according to DeFi-Pulse. This latest increase has already surpassed growth in 2020, this year the TVL shot up 253% – from $ 23.8 billion to $ 84.1 billion – compared to an increase of 183% last year (from $ 8,390 million to $ 23,800 million).

Much of this new growth is due to the arrival of new competitors in the space of decentralized applications (dapps), among those who meet:

• Solana
• Avalanche
• Ghost
• Cardano

Everything is from platforms focused on smart controls already established their own DeFi ecosystems of native dapps and predefined cheaper and faster transaction speeds that the current technology blocks from Ethereum.

2. The NFT boom

It’s not just DeFi that you’re starring in bitcoin. Out of NFTs market also has a major success in 2021. The amount spent to buy NFTs over a period of one period of 30 days has increased drastically, about $ 10 million principles from 2021 to about $ 2.6 billion as of September 17th.

Due to the rise of DeFi and NFTs, the dominance of bitcoin — the total market capitalization of that cryptocurrency in relation to the total market capitalization of cryptocurrencies — has fallen significantly: it was 69.7% at the beginning of year but is now around 41.9%. In other words: bitcoin does not arouse the same interest and attention as nine months ago. This could show why it cost to gain the purchase pressure needed to exceed $ 50,000.

3. The regulatory pressure of the United States

The US Senate recently approved the controversial infrastructure bill. This is a budget of $ 1200 billion to improve various areas of the economy. Part of the proposal includes the modification of treatment necessary to the cryptocurrencies, with the proposal of help to pay this giant guest. One of the changes is to require cryptocurrency brokers to report their transactions. Although the requirement itself is considered a means to monitor crypto users and ensure better tax compliance, the main reason for conflict is the lack of one clear definition of the term “broker”. Proponents of cryptocurrency argue that the term is too broad and can be interpreted in a way that includes cryptocurrency miners, developers, and node validators, none of whom are custodians of their clients’ funds.

Although there have been attempts by a bipartisan group of members of Congress in favor of cryptocurrencies to amend the bill, it seems somewhat likely that much can be done to change the information requirements on cryptocurrencies before they are passed as law. . Historically, regulatory uncertainties such as this have often affected bitcoin performance.

In addition, there are ongoing regulatory disputes between U.S. state securities regulators. and lending crypto companies, such as Celsius and BlockFi. Regulators argue that interest-bearing crypto savings accounts offered by both companies violate state securities laws.

At the federal level, the Securities and Exchange Commission (SEC) has maintained a cautious approach to cryptocurrencies, which is why a bitcoin exchange-traded fund (ETF) has not yet been approved in the US. Analysts believe that the approval of one bitcoin ETF could appreciate a new flow of interesting minority and institutional to bitcoin, however it might prove essential to reach the value of $ 100,000.

Although the SEC does not seem very excited about bitcoin ETFs anchored in the physical bitcoin, there is one small possibility of it considering the approval of ETFs of future bitcoin (an ETF that has bitcoin futures as an underlying asset).

4. The dollar goes up

Following the publication of the information on retail sales from August, the dollar fell to one high of nearly three weeks on 17 September. Retail sales they increased 0.7% despite expectations that they would fall 0.8%. These data show that the U.S. economy is in one bullish trend and that companies are living to a new market reality after the certain provocations for the pandemic. Despite the outbreak of the delta variant of the coronavirus, the appetite to spend has not diminished. Thus, one economy in recovery means less interest in the assets of economic opening like bitcoin.

Another economic date that could be assessed is the bleak reaction of the bitcoin market is the falling inflation rate US from 5.4% to 5.3% in August. While some believe that this figure is high compared to the country’s historical histories, others see it as a positive indicator, given that the situation could have been much less.

5. China bans bitcoin completely for the first time

On September 24, the People’s Bank of China (PBoC) issued one new statement on the illegality of cryptocurrency transactions and mining; y added that now transactions from crypto to crypto, as well as crypto to fiat, are prohibited. This means that virtually all activities related to the trading of cryptocurrencies are prohibited in the country for the first time, including the purchase, sale or trading of digital currencies such as bitcoin, ether and tether.

From a Chinese central bank also explained that it will explore any city that will work for crypto exchanges abroad.

But it was not just the PBoC that ruled on the new crypto laws: the National Development and Reform Commission (NDRC) also expressed its intention to intensify the application of energy measures against cryptocurrency mining in the country. In one statement titled “Notice on the adjustment of the activities of virtual currency mining”, the officials established aircraft to completely eliminate the mining of cryptocurrencies in the country.

First, if you restrict the new companies that want to enter the mining industry. Second, if ordered by the local authorities who support everything to the existing mining operations, which includes cutting off the direct supply of electricity and encouraging other suppliers to increase the costs so that the mining operations are viable from a financial point of view. Lastly, the NDRC has one that will thwart any new investment in the sector and run any financial service remaining to the cryptocurrency mining companies.

The price of Bitcoin fell almost 10% when it came to advertising, from $ 45,099 to $ 40,693. But since then, prices have recovered 8% to $ 43,890.

Translated byAndrés Engler.

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