Bitcoin turned lower again on Thursday, after having tried to overcome the falls it has left this week and that have approached it to $ 31,000. Digital asset hit a three-week low below $31,500 following testimony from Federal Reserve (Fed) Chairman Jerome Powell in which he pointed to the possibility of the central bank deploying a digital dollar.
The noise that this week has been generated around the digital currencies of central banks (CBDC for its acronym in English), with news from two of the largest monetary supervisors in the world, has weighed on cryptoassets, experts say. On Wednesday, the European Central Bank (ECB) announced that it will continue with the work of a future digital euro, in a new investigation phase of at least 24 months. In this period, a digital currency model will be designed for the eurozone that could see the light of day by the middle of this decade, according to the same central bank.
Powell, for his part, said Thursday that he was undecided about whether the benefits of the central bank’s digital currencies outweigh the costs. “The most direct way” would be to regulate stablecoins, commented, as reported by ‘CoinDesk’. “Our obligation is to explore both technology and policy issues over the next two years, so that we are in a position to make an informed recommendation.”
The remarks came a day after Powell testified before the US House of Representatives that “you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies”, if there were a digital dollar.
The news that central banks around the world are exploring ideas for digital currencies, have opened the eyes of investors who realize that there is a lot of competition in cryptospace. That could dilute the valuation of some of the digital assets currently in use,” says Brian Vendig, president of MJP Wealth Advisors. “There’s a lot of things out there that investors are weighing and digital assets might be losing their luster a bit because they are volatile,” he adds.
Other experts, picked up by ‘Bloomberg’, think, instead, that the prospect of CBDCs could put pressure on the original cryptocurrency. “The move away from cryptocurrency wallets comes as speculation mounts about the impact of central banks around the world on the launch of rival digital currencies” says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
A FOR THE 30,000?
In any case, bitcoin is going through a bad time lately. It has been following its 20-day moving average, although it is already trading below it despite having struggled to jump above this line on a sustained basis. The coin could soon approach what many consider a critical support level: $30,000. A break below that level could indicate that the currency continues its decline towards $25,000, a price level it has not tested since late December.
“Bitcoin seems fragile”, assumes Lennard Neo, head of research at Stack Funds. “Unless we see a clear break towards the positive region, it’s hard to point out that speculative allaers are back.” As for the rest of the market, ethereum is also unable to win back the $2,000 and red dyes the ‘altcoins’. Total capitalization barely detachs from $1.3 trillion.
Meanwhile, the staunchest enthusiasts who have been arguing that bitcoin and some other cryptocurrencies are a hedge against rising prices the consumer and the excessive printing of money by world central banks are seeing that argument put to the test by the remarkable uptick in inflation in the US. “The reality is that, as there has been no widespread productive use of blockchain technology in our society, investors have retreated a bit and recognize that it is a more speculative investment,” vendig concludes.