The price of Bitcoin (CCC:BTC-USD) was cut nearly in half over the last three months, but traders are now breathing a sigh of relief as BTC levels out.
That’s because, after briefly falling below $30,000 on June 22, the cryptocurrency has bounced back. It’s now trading at around 33,100.
There were two catalysts for the latest move down.
First, the U.S. government seized Bitcoin ransom from the Colonial Pipeline hack, proving its not as anonymous a payment mechanism as advertised.
Second, China renewed its crackdown on cryptocurrency, shutting down miners and warning financial institutions away from it.
Until speculators moved back in, some were asking if Bitcoin had a future.
HODLers and BTC
Those who Hold On for Dear Life (HODL) to crypto were joyful over the latest rebound.
Crypto critic Nouriel Roubini had recently taken to sharing negative news on Bitcoin again. Now crypto analysts are coming out of the woodwork after the price went from a “death cross” to a “near bull market.”
Prices have risen even after the U.S. government moved to make Bitcoin transactions more transparent and to make sure Bitcoin speculators pay taxes. South Korea has seized cryptocurrency from tax cheats.
Critics like Sen. Elizabeth Warren have called on regulators to confront crypto’s problems “head on,” while supporting the idea of a digital dollar. Even Bitcoin advocates admit the technology is not yet foolproof and that privacy cannot yet be guaranteed.
Bitcoin analysts are now predicting a period of consolidation, a trading range of $31-41,000. A year ago, Bitcoin was generally trading under $10,000. Bulls called sellers people with “paper hands” and noted that crypto is still up for the year.
Other crypto coins have been just as volatile as Bitcoin. Dogecoin (CCC:DOGE-USD), which briefly topped 70 cents in May, traded below 20 cents on June 22. Ethereum (CCC:ETH-USD), which was near $4,300 in May, was below $1,800 on June 22.
What Is It Good For?
While crypto currency has been a great trading asset in 2021, as it was in 2017, it’s still not money.
El Salvador has tried to change that, making Bitcoin legal tender for all debts. A writer at The Wall Street Journal quickly criticized the move, calling it a “forced tender,” which he described as “a communist staple.”
At The New York Times, Cornell economist Eswar Prasad called Bitcoin an experiment, pointing the way to useful blockchain technology but otherwise acting as a mere vehicle for speculation.
A JPMorgan Chase (NYSE:JPM) survey showed views on Bitcoin are as divided as on any political question.
One-third consider it “rat poison,” another one-sixth call it a fad, and 81% expect tighter regulation. At the hearing where Warren urged such regulation, Republicans quickly defended crypto as “free enterprise.”
Below the surface, many countries want Bitcoin’s blockchain technology to cut financial transaction costs.
China’s Digital Yuan, the Federal Reserve’s talk of a “digital dollar,” and the European Union’s move to issue a “digital wallet” all have the same goal.
When there’s cash on both sides of a transaction it should happen immediately, not wait for an expensive “settlement” process.
The Bottom Line on BTC
The flood of cash into U.S. financial markets, starting with the 2017 tax cut and continuing with the COVID stimulus, has made speculation a Gilded Age spectacle.
Nothing is more gilded than Bitcoin.
While created with the idea of making the dollar obsolete, Bitcoin transactions cost more to make than those made in dollars.
While created with contempt for government, Bitcoin has itself become a contemptible government.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
