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Can the crypto plane take off?

The world’s top cryptocurrency, Bitcoin, experienced a 15% rally from the beginning of July through to the 24th of the month and Ether’s performance was even better. Crypto traders were unsure whether to expect more of the same, or, perhaps, the abysmal first half of the year was inevitably going to continue its course. Shawn Cruz of TD Ameritrade was optimistic Bitcoin “Could probably tread water here for a little bit.

It’s a matter of waiting for risk appetites to turn around”. On the other hand, Matt Maley of Miller Tabak + Co. was doubtful, on the grounds that the ”Rally was fuelled so much by young people who had never invested in anything before”.

Despite the upsurge from the start of the month, Bitcoin, Ethereum and Dogecoin lost 5%, 6% and 7% respectively within a day on July 21st. Here, the catalyst seemed to be an announcement by the European Central Bank that a 50 basis-point interest rate hike could be expected, which, predictably, took away traders’ risk appetites. Also contributing was the news that EV maker Tesla had got rid of three-quarters of their Bitcoin holdings in Q2, which was done to “maximize our cash position”, explained CEO Elon Musk. He also made sure to add that “We have not sold any of our Dogecoin”.

Musk’s name is associated with the altcoin because his promotions of it on social media last year nudged its price upward. If you have an interest in trading crypto with iFOREX as CFDs, join us for a review of the top cryptocurrency coins and a peek towards the future.

Crypto Investigations

When the Three Arrows crypto hedge fund imploded mid-year, crypto confidence was shaken. Regulators wanted to know if anything illegal had transpired behind the scenes. Coinbase Global Inc. found itself the subject of investigations on the point of whether it facilitated crypto trading without enforcing proper restrictions. In sympathy, Coinbase shares plummeted 20%.

The US Treasury Department also took an active interest in the question of whether the Kraken crypto exchange illegally gave access to its platform to Iranian users. Another company feeling the heat was Asian crypto exchange Zipmex, who lent money to Celsius Network Ltd, which ended up bankrupt, and also to Babel Finance, who were forced to re-organize their business considerably. Zipmex had to come up with $50 million in July to get itself out of financial trouble.

As if to confirm the need for regulatory scrutiny, the data about cryptojacking attacks in the first half of the year came out in July, revealing that the number of these crimes had increased by 30% compared with the previous year. Ransomware crimes, which work by direct communication with the victim, had been the focus of government attention during the period, and so had declined. Cryptojackers, by contrast, don’t require a victim response and use their malware to take control of companies’ computer networks, which they use to mine for Bitcoin.

A Cryptic Future

Analysts argued about the meaning of the July crypto rally, which took the Avalanche token up to $25.43 and Ethereum up to $1,569 by July 20th. The top cryptocurrency was holding at $22,348 at the time, down 3.9% on the day. Despite the recent upsurge, which came together with a rally in tech shares, Bespoke Investment Group soberly remarked that “A resumed long-term crypto bull market is hardly guaranteed.

Data came out at around this time indicating that long-term traders in Bitcoin had also started offloading their coins, despite the financial loss entailed. Ever-optimistic, though, Glassnode suggested “Numerous signals indicate that genuine bottom formation could be underway”.

By the close of July, there were some real headwinds for the crypto sector and they weren’t about to disappear overnight. In the middle of the ongoing Ukraine crisis, Europe was living in uncertainty about the future of its gas supplies, with Russia threatening to put an end to its shipments.

Food prices were still soaring across Europe, and on the forex side, the USD had been dominating other national currencies for the year so far. All these factors and the tight monetary environment did not bode well for digital currency.

Peering Ahead

Readers who are thinking of trading crypto with iFOREX as CFDs on some of the top cryptocurrency coins like Dogecoin are looking ahead for a glimmer of light. Edward Moya of OANDA sees the Ukraine conflict giving “underlying support for the dollar, which could drag down risk appetite, which could weigh on cryptos”.

Matt Maley feels that, “As long as the Fed is tightening, it’s going to be hard to see a sustained rally”, especially because of the recent loss of trader confidence in digital currency. CFD traders, however, have no particular preference for the direction asset prices should take, since they trade in price differences, whether they be losses or gains. All in all, keep an eye on the news as well as performance charts to make more well-rounded trading decisions.

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