In the past year, the rise of Bitcoin and cryptocurrencies has attracted investors and encouraged many to buy bitcoin. However, right now, it seems that all is not well in the crypto market. There have been several drops seen in the past month, and most recently, at the start of June, the price of Bitcoin fell overnight by an astonishing 10%. This in turn had a knock-on effect that hit Ethereum, Dogecoin and Cardano – with billions being wiped off their value.
At the end of May, Bitcoin was still significantly under its all-time high of $62,000 with a value of $40,000. However, at the beginning of June, it had dropped down to $32,000 which is almost a 50% drop in just a few months. This, in turn, has seen the overall market cap of all combined cryptocurrencies at under $1.5 trillion.
A Rise in Acceptance
This is confusing for many because there does seem to be growing support for all cryptocurrencies. Indeed, it was only recently that the President of El Salvador had announced that Bitcoin would now be considered as a legal currency and tender in the Central American country.
Moreover, the cryptocurrency received another boost when Jose Shark of the NHL became the latest major US sporting body that would start accepting payments in not just Bitcoin, but also dogecoin and ether.
Despite Donald Trump declaring Bitcoin to be a ‘scam’, he did also say that it would be a currency that could eventually rival their own US dollar.
So Why the Drop?
So, if more people are accepting cryptocurrency as a viable payment method, then why the drop? Well, this could well be down to some less positive developments that have also started hitting the headlines of late.
The biggest factor seems to come from China – the home of bitcoin. There have recently been a number of crackdowns on trading – and this has led to some big investors pulling out. This, in turn, has led to more caution from crypto players across the board. Ultimately, the value of cryptocurrencies very much depends on professional investors, and as it stands, it seems that they are concerned about the short term outlook of cryptocurrencies. In fact, when meeting with 25 chief investment officers of long-only and hedge funds, Goldman Sachs stated that it seems Bitcoin was identified as their “least favourite asset for investment”.
In addition, Ruffer, the London-based asset management firm, stated that in April, they closed their bitcoin position for over $1.1 billion in profit. It has then moved this profit into other assets such as government bonds. However, this may not be for the long term. There is still confidence that many major financial institutions, including Goldman Sachs and Ruffer, will keep investing in Bitcoin – and that future purchases are certainly not off the cards.
A Move to El Salvador
Bitcoin may be dropping right now, but the interest in the coin has risen significantly in El Salvador since the President declared it legal tender. But will this lead to people heading over to live in the country? It certainly seems as though this is one of the aims of the move.
As well as making Bitcoin legal tender, President Nayib Bukele has also been active on Twitter, highlighting all the benefits of moving to the country – including great weather, world-class surfing beaches, and reasonably priced beachfront properties for sale. However, he also stated that there would be no capital gains tax for Bitcoin now, as it would be considered legal tender – which makes a move to El Salvador pretty enticing for those investors who face a hefty tax bill on the profits. This was certainly enough to capture the attention of the CEO of Binance, Changpeng Zhao, who called the offer ‘enticing’.
Will Paraguay Follow Suit?
Is this now the start of a trend in Central America? Will others follow EL Salvador’s lead? Well, this seems highly likely and all eyes are on Panama to be the next. Indeed a Congressman in Paraguay has added Bitcoin laser eyes to his Twitter profile which has certainly set tongues wagging. The man in question, Carlitos Rejala, beside this updated image, stated that Paraguay is a country that needs to advance and move forward with the times. He believes that this is the moment and that this is the step forward needed. He described it as “an important project to innovate Paraguay in front of the world! The real one to the moon #Bitcoin”