Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Pullback In Bitcoin And Ethereum: Trend Remains Higher But So Do The Risks

By Investing.com (Andy Hecht)CryptocurrencyApr 05, 2021 08:00AM ET
www.investing.com/analysis/pullback-in-bitcoin-and-ethereum-trend-remains-higher-but-so-do-the-risks-200571259
Pullback In Bitcoin And Ethereum: Trend Remains Higher But So Do The Risks
By Investing.com (Andy Hecht)   |  Apr 05, 2021 08:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com.

  • Crypto asset class striving for mainstream acceptance
  • Governments are a roadblock; Technology businesses provide support
  • Bitcoin pulls back resuming scary volatility; Opportunity or a warning?
  • Ethereum is on a bumpy road

At the $60,000 and $2,030 levels respectively at the end of last week, Bitcoin and Ethereum pulled back from their recent highs, then snapped right back. Meanwhile, the ascent of the tokens that float around in cyberspace has been nothing short of incredible.

Last March, Bitcoin traded to a low of $4,210, and Ethereum hit bottom at the $124.50 level. Each crypto coin has been a ten-bagger even after the recent corrections from new record highs.

Market participants who believe that higher levels are on the horizon argue that the overall market cap remains small at the $2 trillion level. After all, Apple’s (NASDAQ:AAPL) valuation alone stands at over $2 trillion. On the flip side, some critics argue that the tokens have no intrinsic value and will eventually become worthless. Markets need buyers and sellers, of course, but the digital currency landscape is composed of many extremes.

Each time Bitcoin rises to a new high, the bull’s voices become louder. During corrections, the bears seem to come out of the woodwork.

I take an agnostic view of the asset class. I respect trends as they reflect the wisdom of crowds. And the crowd continues to tell us that we have not yet seen tops in the digital currencies.

Crypto asset class striving for mainstream acceptance

Cryptocurrencies are building critical mass. More and more companies are accepting digital currencies as payment.

As of the end of March 2021, the list includes Microsoft (NASDAQ:MSFT), AT&T (NYSE:T), and many others.

Recently, Tesla (NASDAQ:TSLA) announced it would accept Bitcoin as payment for the company’s EVs. Sports teams in the US are also accepting Bitcoin. The Miami Dolphins intend to give home game attendees the ability to pay with Litecoin and Bitcoin. The Dallas Mavericks and Oakland A's also accept digital currencies.

As the list grows, the asset class is gaining the support base necessary to challenge traditional money.

Governments are a roadblock; Technology businesses provide support

The US, Europe, and other governments have expressed concerns about the “nefarious” uses of digital currencies. US Treasury Secretary Janet Yellen and ECB President Christine Lagarde have said that the asset class's volatility and uses for, what President Lagarde called, “funny business,” masks the underlying reason for their opposition.

Governments control the money supply via the traditional currency markets. As digital currencies are a global means of exchange that operate across borders without interference from governments or central banks, they represent a threat to the control of the money supply in countries and worldwide.

Moreover, the philosophy behind the cryptocurrency asset class is to remove government control from money. Therefore, governments will continue to oppose Bitcoin and the other over 9,100 tokens, and the digital currencies will resist any government regulations and attempts to control the market.

Governments are a roadblock for the new currencies, setting up an epic battle as acceptance rises.

Meanwhile, founders and CEOs of businesses that are disruptive technologies are taking sides. Tesla’s Elon Musk, a modern-day DaVinci or at least Thomas Edison, has invested $1.5 billion of Tesla’s cash hoard in Bitcoin. Jack Dorsey, the founder and CEO of Twitter (NYSE:TWTR) and Square (NYSE:SQ), has bought $220 million worth of Bitcoin.

Some of the leading technology companies are not only accepting the tokens; they are investors, holding substantial risk positions in the volatile currencies.

Bitcoin pulls back resuming scary volatility; Opportunity or a warning?

Bitcoin’s trend remains bullish as we head into 2021’s second quarter. The leader of the digital currency asset class continues to make higher lows and higher highs.

Bitcoin Futures Daily
Bitcoin Futures Daily

Source all charts: CQG

On Mar. 15, April Bitcoin futures on the CME traded to a new all-time high at $62,080 per token. Ten days later, on Mar. 25, the price corrected to a low of $50,595, a drop of 18.5% below the peak. While Bitcoin recovered to around the $60,000 level on Apr. 1, the volatility is scary.

Excessive volatility tends to occur in markets with limited liquidity. Selling often disappears during bullish periods and buying dries up when the price moves to the downside.

Central banks and governments manage the global foreign exchange market with coordinated intervention to provide stability and limit one currency’s volatility versus another. The official sector will continue to argue that digital currencies suffer from far too much price variance to offer an effective and efficient means of exchange.

Meanwhile, digital currency devotees will point out that the cryptos reflect actual value, while the value of the dollar, euro, and other global foreign exchange instruments are manipulated in the interest of the governments that issue the legal tender.

Time will tell if the high volatility level is an opportunity for investors to buy on dips or a warning sign of impending problems for the asset class.

Ethereum is on a bumpy road

Ethereum Futures began trading on the CME on Feb. 8. When Bitcoin appeared in the futures arena in late 2017, it pushed the price to over $20,000 per token for the first time. Ethereum experienced a similar rally, rising to a record high of $2,057.75 on Feb. 19 before falling 29.3% to $1,454.75 on Feb. 26.

Ethereum Futures Daily
Ethereum Futures Daily

Source: CQG

As the chart shows, Ethereum futures recovered to just over the $2000 level on Apr. 1. While the price data is far more limited than for Bitcoin, the same bullish trend of higher lows is emerging in Ethereum since late February.

Anyone involved in trading or investing in Bitcoin, Ethereum, or any of the other 9,100 digital currencies needs to realize that volatility could increase as governments and central banks seek to flex their muscles to control the worldwide money supply. The road ahead will be very rocky.

However, the more businesses accept cryptocurrencies as payments, the rise of high-profile investors is bullish for the asset class with a market cap just below the $2 trillion level at the end of Q1 2021. While the number seems sky-high, it is not.

Consider that US government just spent $1.9 trillion on stimulus, and will spend another over $2 trillion on infrastructure rebuilding. As well, Apple’s market cap is over the $2 trillion level.

Digital currencies have room to move far higher. The road to the upside will be dangerous as the market builds critical mass. Though the trend is higher, the risk of downdrafts rises with prices.

Digital currencies represent technology’s impact on the money and banking system. Do not expect governments to accept the asset class any time soon. They will continue to fight for control of the world’s purse strings, which will only exacerbate price volatility.

Pullback In Bitcoin And Ethereum: Trend Remains Higher But So Do The Risks
 

Related Articles

Pullback In Bitcoin And Ethereum: Trend Remains Higher But So Do The Risks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Lars Sarl
Lars Sarl Apr 05, 2021 11:51AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The world government will tax the crypto any day. Maybe they already are.
Bernard Giorgino
Bernard Giorgino Apr 05, 2021 11:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
No thanks. I prefer to invest in fiat, from which I know there will always be enough as they are printing tons of it faster than the speed of light.....
Matthew Barnes
Matthew Barnes Apr 05, 2021 11:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Fiat currency is dead
James Vandervest
James Vandervest Apr 05, 2021 11:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If governments oppose it, that is because they don't want any challenges to their constantly devaluing fiat currency.
American Truth
American Truth Apr 05, 2021 8:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So crypto may go higher or lower, got it ffs.
Matthew Lyons
Matthew Lyons Apr 05, 2021 8:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Enjin has a great environment and the best crypto wallet! It's cheap and a keeper. Don't forget THETA token if your into solid gains!
Stunner GH
Stunner GH Apr 05, 2021 8:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hello
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email