Bitcoin has plunged in the month since its peak. By 6 p.m. on May 19, it had lost 40% of its value since hitting $ 64,606 a piece, according to CBS News. Meanwhile, shares of the cryptocurrency trading platform, Coinbase, have fallen by a third since its direct listing on April 14.
Elon Musk’s tweets are a big driver of Bitcoin’s price. When he tweeted that Tesla would let people use it as currency, Bitcoin went up; when he called the cryptocurrency a “scramble” on SNL and later tweeted that Tesla would no longer accept Bitcoin because it consumes too much power, the price dropped.
The cause of the latest fall was a statement posted on the China Banking Association website on May 19 saying that financial institutions should “resolutely refrain” from providing services using digital currencies due to their volatility. Virtually all cryptocurrencies fell after the industry group’s statement.
If you’ve owned Bitcoin since mid-2011 when the price was a few cents, you probably don’t care. As I wrote here in February 2014, people who have been infected with the Bitcoin brain virus are not deterred from owning it by a drop in its price.
Does this make falling Coinbase shares a buying opportunity? The answer depends on how realistic Coinbase’s optimistic growth forecast is. If Elon Musk changes his mind and starts accepting Bitcoin again to buy Teslas, I expect Coinbase stock to take off.
Otherwise, Coinbase will continue to fall. But it won’t cost you the precious dopamine shot you can still get from your upvotes on your Reddit post on How Much You Lost.
Bitcoin’s energy consumption and volatile price
Bitcoin is a digital currency launched in 2009 that allows users to spend money anonymously. It is not tied to any bank or government and is created using computers running 24/7 to solve difficult math problems – Bitcoin mining. There are around 18.7 million Bitcoins in circulation and only 2.3 million have yet to be mined.
CBS News reported “that a 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to that of a large western city or country. developing whole like Sri Lanka. “
A 2020 study from the University of Cambridge estimated that, on average, 39% of the ‘proof-of-work’ crypto-mine was powered by renewable energy, mainly hydropower. As I wrote in February 2018, the continued and cheap demand for hydroelectric power makes Wenatchee, Washington a popular place for bitcoin miners.
Bitcoin peaked on April 13 and has been declining since then. Yet it is still up 31% in 2021 and about 300% more than in May 2020. A five-year-old holder is sitting on gains of more than 6,000%, noted the the Wall Street newspaper.
Is Bitcoin a currency?
Cryptocurrencies are worth an incredibly large amount – $ 1.5 trillion – but their value is still much smaller than stocks ($ 46.9), residential real estate ($ 41.3 trillion) and securities. from the Treasury ($ 21 trillion).
The anonymity of cryptocurrencies makes them ideal for criminals. And since banks are subject to Know Your Customer regulations, in theory, banks will never allow them to be used for transactions.
According to CBS News, the European Central Bank said the risk of cryptocurrencies affecting the stability of the financial system appears “limited at this time” because they are not used for payments.
Washington officials are talking more about regulating digital currencies – however, they seem to fear the financial turmoil that could ensue if they attempt to ban them altogether.
Cryptocurrencies will have to solve some difficult problems to become useful for business transactions. As the Journal points out, they are too volatile to be relied on as a medium of exchange and few libertarians would want their fortunes to depend on what Chinese regulators do.
I don’t know why the Journal doesn’t seem to think these libertarians are happy to bet their financial situation on the whims of Elon Musk.
Excellent financial report and forecast from Coinbase
Coinbase hit its ambitious forecast for the quarter ending March 2021. Its revenue of $ 1.8 billion was up 843% year-over-year, while its adjusted EBITDA of $ 1.1 billion of dollars was multiplied by 19, according to Coinbase. This matched his predictions, according to Coindesk.
On May 13, Coinbase announced a continuation of this rate of growth in the quarter ending June 2021. For the second quarter, Coinbase said it expects “all of its trade metrics to meet or exceed results recorded in the first quarter. Q2 trade volume will “slightly” exceed Q1 trade volume if it persists at the same rate, “Coindesk reported.
Coinbase has increased its 2021 annual forecast range for users doing monthly transactions (MTU) by 32% from 4 million to 7 million to between 5.5 million and 9 million.
What’s next for Crypto and Coinbase?
Just like cryptocurrency stocks, so too is Coinbase’s share price.
The basis for predicting their future seems fragile to me.
If you are a crypto bull, you will gobble up information that confirms your optimism and ignore anything that contradicts it and vice versa.
Bulls like Cathie Wood, CEO of Ark Invest, and tech entrepreneur Justin Sun see an opportunity in falling prices. Wood saw the decline as a “sellout” and sees Bitcoin as “on sale”. Sun, founder of the cryptocurrency platform Tron, “tweeted that he bought $ 152 million in Bitcoin for about $ 37,000 a coin,” according to Bloomberg.
Galaxy Digital CEO and Chairman Mike Novogratz remains a Bitcoin bull. As he said, “You had a confluence of events … where you started to break positivity into the price action, and now we have a sell-off event. The market will consolidate. He’ll find a bottom somewhere. I hope it’s close to here ”, reported CNBC.
Not everyone is a Bitcoin bull. Indeed, Edward Moya, Senior Market Analyst at OANDA, said: “Coinbase’s trading debut coincides with Bitcoin’s peak and many traders cannot make a convincing argument that it will be able to recoup all of these losses. since then, ”according to CNBC. .
Institutional analyst sees investors exiting crypto to turn to gold. JPMorgan Chase & Co.
Elon Musk tweeted emojis for Diamond and Hands – meaning he doesn’t sell his Bitcoin.