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Bitcoin Tops $40K, but Lack of Blockchain Activity May keep Lid on Gains

Published 07/26/2021, 03:31 PM
Updated 07/26/2021, 03:55 PM
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By Yasin Ebrahim 

Investing.com – Bitcoin topped $40,000 Monday for the first time in more than month amid signs Amazon (NASDAQ:AMZN) is shaping up for a move into the crypto industry, but the dearth of activity on the network that powers the popular cryptocurrency could be signalling caution ahead.

BTC/USD rose 17% to $40,552, rising above the $40,000 level for the first time since June 15.

The impetus for the move higher was widely been attributed to a job posting from Amazon that suggests the e-commerce giant could be warming up to the idea of using blockchain technology and crypto on its platform.

“The payments acceptance & experience team is seeking an experienced product leader to develop Amazon’s Digital Currency and Blockchain strategy and product roadmap,” according to the ad.

The idea of Amazon making a splash in the crypto world was given further credence after City A.M. reported, citing an unnamed source, that the e-commerce behemoth was looking to integrate blockchain technology deep within the plumbing of its platform.

 “This isn’t just going through the motions to set up cryptocurrency payment solutions at some point in the future—this is a full-on, well-discussed, integral part of the future mechanism of how Amazon will work,” City A.M. reported, citing the anonymous source.

The news reportedly forced investors who had placed bearish bets on bitcoin to cover their positions, adding further fuel to the rally. More than $950 million of crypto shorts were liquidated on Monday, the most since May 19, according to data from Bybt.com.

Others, meanwhile, attributed the rise to a string of positive remarks on bitcoin from Tesla (NASDAQ:TSLA) CEO Elon Musk, Twitter CEO Jack Dorsey, and Ark CIO Cathie Wood during a recent virtual conference on bitcoin.  

Acknowledging that bitcoin is making strides toward lessening its impact on the environment, Musk hinted that Tesla could resume accepting Bitcoin for purchases.

“It looks like Bitcoin is shifting more toward renewables,” Musk said. “I would want to do a little bit more diligence to confirm the percentage of renewable energy usage is at or above 50%.”

As the bulls celebrate the revival of the bitcoin, there are some who suggest that activity on the blockchain, which remains in doldrums, would need to return to support a sustainable rally in the popular crypto.

“Overall, on-chain activity remains somewhat bearish and continues to be quiet,” Glassnode said in its weekly on-chain  report. “If on-chain volumes do not rise in support of these elevated prices, it may suggest the rally lacks fundamental drivers and would be a sign for caution.”  

“On a 14-day median basis, the entity-adjusted transaction volume for Bitcoin remains depressed at around $5 billion per day. This remains a significant decline from the $16B/day prior to the May Sell-off.”

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