Menu Close

Cryptocurrencies: Bitcoin dips as rising yields prompt rethink of popular trades

Cryptocurrencies

*Largest token slips amid wider selloff in financial markets as Crypto faithful still see role for Bitcoin as cash alternative

*Citigroup in a report suggests that the virtual currency could become ‘the currency of choice for international trade’, if all continues to go well for it

Alexander Davis | ConsumerConnect

Bitcoin fell for a second day amid concerns that a jump in bond yields is sapping demand for riskier investments.

The largest Cryptocurrency shed as much as 3.4% Friday, March 5, and was trading at about $47,000 as of 1:05 p.m. in Hong Kong.

The Bloomberg Galaxy Crypto Index, which includes Bitcoin and four other tokens, slipped more than 3%.

Edward Moya, Senior Market Analyst at Oanda, wrote in an e-mail, said: “Bitcoin was another victim of Fed Chair Powell’s hesitancy to push back over rising Treasury yields.”

While the coin’s fundamentals are robust, it may be “vulnerable in the short term” if the slide in equities continues over the next week, Moya said.

Long-time proponent Michael Novogratz at Galaxy Digital Holdings Limited remains bullish, reiterating a prediction that Bitcoin will probably hit $100,000 before the end of the year.

He argued in an interview that it and other digital currencies have become “an institutional asset class” and banks are “frantically” trying to get in on the action.

Bitcoin slid 21 percent last week, but is still up more than fivefold in the past year, report stated.

On a narrative, the token can hedge inflation risk and the debasement of fiat currencies ─ akin to gold ─ and is set become a bigger part of institutional portfolios.

A rival view depicts a stimulus-fueled bubble set to pop.

“We’re still at an early stage in the institutional adoption of crypto in asset allocation,” a team led by Inigo Fraser-Jenkins, head of global quantitative strategy at Sanford C. Bernstein in London, wrote in a note Friday.

But the team added that a fundamental valuation of Bitcoin is “simply impossible.”

Meanwhile, the possibility that cryptocurrencies could become a part of everyday life has received a major vote of confidence.

In a new report, titled “Bitcoin At the Tipping Point”, Citigroup suggests that the virtual currency could become “the currency of choice for international trade” if all continues to go well for it.

The company says that step could be the start of a “massive transformation of Cryptocurrency into the mainstream.”

However, and if things don’t go well? The Citigroup team says that “speculative implosion” could happen.

Analysts explained the potential failure, saying that there are “a host of risks and obstacles that stand in the way of Bitcoin progress.

But weighing these potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point.”

According to the report, Bitcoin’s enormous upside has been driven by recent aggressive moves by companies like Tesla, which invested $1.5 billion in the currency, and Mastercard, which has decided to accept some Cryptocurrencies as payments later in 2021.

Kindly Share This Story

 

Kindly share this story