Bitcoin on Reverse Gear: How Low Can it Go?

Bitcoin on Reverse Gear: How Low Can it Go?

Summary

  • Bitcoin is now facing criticism after its recent surge in price.
  • Some regulators are working on ways to gain control over economic and security concerns.
  • Negative Publicity from institutions may set the pace for a price reversal

Bitcoin hovered around the $49,000 territory as it kept up its fight against a combined onslaught by regulators and corporate hegemons. Nonetheless, some institutions are still incorporating the cryptocurrency in their asset inventories. Bitcoin prices still have the momentum to keep it above $50,000, but any further spike in pressure may trigger major reversals.

Institutional foundation

Ever since Tesla bought $1.5 billion worth of Bitcoin, the cryptocurrency has drawn a lot of interest from the corporate world. BTC has since gone on to touch the $1 trillion capitalization mark, but recent consolidation has led to a reversal of some of the gains made. The world’s largest cryptocurrency is currently worth slightly less than $1 trillion.

A few days ago, Square Inc. announced that it had increased its Bitcoin inventory. The company attributed the move, which saw the addition of Bitcoin worth more than $100, to increasing demand for digital assets by users of Cash App.

Additionally, yesterday, it was reported that Bordier, a Swiss bank, had begun dealing in digital currencies. The bank has done this through affiliation with another financier called Sygnum Bank to provide a platform for trading in digital assets that include Bitcoin. This is yet another move for the cryptocurrency towards integration into the mainstream financial system.

Over the past two days, MicroStrategy Inc. also added more Bitcoin to its trust. As of yesterday, MicroStrategy was holding more than 90,500 bitcoins which it had bought for nearly $2 billion.

Major setbacks creeping in

Earlier today, Mastercard released a statement saying that it was not considering adding Bitcoin to its platform. This is seen as a reversal of its earlier stance on the cryptocurrency.  Ann Cairns, the executive vice chair at Mastercard attributed the decision to Bitcoin’s unpredictability, which she said made it unsuitable for making payments. She also decried the time taken to complete transactions done in Bitcoin.

Berkshire Hathaway also read a similar script yesterday. Charlie Munger, the company’s vice-chairman, pointed out Bitcoins’s unpredictability as the main reason for the corporation’s reluctance.

The latest announcements by Berkshire Hathaway and MasterCard are a major setback for BTC. Following Tesla’s large purchase, many cryptocurrency investors had hoped that other major institutions would follow suit. However, the latest development will send ripples across the cryptocurrency market and will certainly be reflected in the BTC/USD price charts.

Earlier today, there were reports that Greyscale’s Bitcoin Trust had reduced in value over the last three days.

Besides institutional headwinds, BTC prices also have to contend with an increasing likelihood of government-triggered interruptions.

Today, the United States Congress is expected to convene a hearing over concerns that Bitcoin is used for funding illegal activities or terrorism. Tightening regulatory restrictions against the cryptocurrency may weaken it further.

There are also reports that governments are aiming to control Bitcoin markets. For example, regulators in Nigeria and Security Exchange Commission are partnering to develop ways to control Bitcoin and the digital currency market.

Two days ago, Janet Yellen, Treasury Secretary, stated that the legality and reliability of Bitcoin are not well known, adding that it was also very unpredictable. That was a strong statement of intent from the head of the world’s largest monetary policy-making body.

BTC/USD: technical outlook

BTC price will find the first support level at $46,453 and the second one at $48,225. It will find the first resistance level at $51,066 and the second one at $52,524.

A break past this point could signal bulls’ intent to drive prices to retest $55,000. Conversely, a fall below $46,453 will set in motion a possible decline below $45,000.

BTC/USD: technical outlook
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