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Bitcoin and ethereum fall: the trend is up, but so is the risk

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  • Cryptocurrency asset class struggles for mainstream acceptance
  • Governments are an obstacle; tech companies provide support
  • He recoils, resuming terrifying volatility; Opportunity or warning?
  • He walks along a stony road

At $ 60,000 and $ 2,030 respectively at the end of last week, the and the have moved away from their recent highs, then rallied. Meanwhile, the rise of digital currencies floating in cyberspace has been incredible to say the least.

I have an agnostic view of this asset class. I respect trends, as they reflect popular wisdom. And the crowd keeps telling us that digital currencies haven’t peaked yet.

Cryptocurrency asset class struggles for mainstream acceptance

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

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

Governments are an obstacle; tech companies provide support

The United States, Europe and other governments have expressed concern about the “nefarious” uses of digital currencies. US Treasury Secretary Janet Yellen and ECB President Christine Lagarde have said that volatility and asset class uses for, as President Lagarde has called them, “curious businesses” mask the underlying reason for your opposition.

Governments control the money supply through traditional currency markets. As digital currencies are a global medium of exchange that operates across borders without interference from governments or central banks, they pose a threat to the control of the money supply in countries and around the world.

Some of the major tech companies are not only accepting these currencies but investing in them, holding significant risk positions in the volatile currencies.

The bitcoin recedes resuming terrifying volatility; Opportunity or warning?

The trend for bitcoin remains bullish as we enter the second quarter of 2021. The leader of the digital currency asset class continues to record higher lows and higher highs.

Bitcoin Futures Daily

Source of all charts: CQG

On March 15, April’s on the CME were trading at new all-time highs at $ 62,080 per coin. Ten days later, on March 25, the price corrected to a lows of $ 50,595, 18.5% below the peak. Although bitcoin rallied to around the $ 60,000 level on April 1, the volatility is terrifying.

Excessive volatility tends to appear in markets with limited liquidity. Selling often disappears during bullish periods and buying is exhausted when price moves lower.

Central banks and governments manage the global currency market with coordinated intervention to provide stability and limit the volatility of one currency against another. The official sector will continue to argue that digital currencies suffer too much price variation to offer an effective and efficient medium of exchange.

Meanwhile, supporters of digital currency will point out that cryptocurrencies reflect real value, while the value of the dollar, euro, and other global exchange instruments are manipulated in the interest of the governments that issue the legal offer.

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

Ethereum advances on a stony path

Ethereum futures began trading on the CME on February 8. When bitcoin appeared on the futures realm in late 2017, it pushed the price to more than $ 20,000 per coin for the first time. Ethereum saw a similar rally, hitting all-time highs of $ 2,057.75 on February 19, then falling 29.3% to $ 1,454.75 on February 26.

Ethereum Futures Daily

Source: CQG

As the chart shows, ethereum futures rallied to slightly above the $ 2,000 level on April 1. Although the data on its price is much more limited than that of bitcoin, the same uptrend of higher lows has been starting to occur in ethereum since the end of February.

Digital currencies have a lot of upside. The upward path will be dangerous as the market builds critical mass. Although the trend is upward, the risk of falling increases with prices.

Digital currencies represent the impact of technology on money and the banking system. Let’s not expect governments to accept this asset class soon. They will continue to fight for control of the money management of portfolios around the world, which will only exacerbate price volatility.

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