Tuesday, July 27, 2021

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    The danger that threatens bitcoin and overcomes China’s crusade

    China’s crusade against the advance of any cryptocurrency other than the digital yuan (which it promotes) has weighed down bitcoin and the rest of the virtual currencies in recent days, so that bitcoin lost ten percent of its value for this reason on Monday.

    However, this is not the greatest danger that lurks in these cryptoassets, according to Bankinter analysts.

    Specifically, the experts of the Spanish bank point out in its recent strategy and outlook report for the third quarter of 2021 that the loss of the opacity attribute that relates to cryptocurrencies could seriously harm the evolution of their price.

    The failure of a cyberattack calls into question the opacity of bitcoin

    Specifically, the document mentions an event that happened recently in the United States, which is the one that calls into question this quality of crypto: the recovery of more than 90 percent of the ransom collected by hackers (75 bitcoins worth about 4.3 million dollars at the time) to unlock the operation of Colonial Pipeline, the main pipeline on the American east coast in May of this year.

    “Perhaps more relevant that the measures progressively adopted by China is a recent event that seriously and for the first time questions the supposedly unquestionable opacity of the movements made with cryptocurrencies: by June 8, the FBI managed to recover the majority of the ransom paid, which shows that it is possible to follow the traceability of operations in cryptocurrencies and that changes things a lot because they lose one of their main attractions: opacity,” the report says.

    “Both the belligerence of China and the loss of its opacity (but above all the latter) mark a before and after for cryptocurrencies, raising the risk of adjustment of quotes in an asset class that, we insist, it is not possible to assess objectively, “adds this document from Bankinter.

    In this way, one of the supposed “attractions” of bitcoin (facilitating opaque operations to the governments of the world) could become its main vulnerability.

    A sharp drop in bitcoin, the main risk for the market in general

    But, in addition, Bankinter experts also believe that this risk goes beyond the scope of bitcoin and cryptocurrencies, being able to reach the whole market.

    This would happen if, instead of the progressive adjustment monitored by central banks (in some indirect way) that Bankinter analysts anticipate, there was a significant and rapid correction in this class of digital assets.

    “We identified this as the main structural risk of the market, since a hypothetical abrupt adjustment of the quotes of cryptocurrencies would also lead to an also abrupt disappearance of a part of the wealth created around them… that would unlikely recover as easily as it was created and that would inevitably affect the tone of the market as a whole, including exchanges and bonds,” the report says.

    Three trillion dollars are invested in cryptocurrencies globally

    Although it is not possible to accurately quantify the global amount invested in cryptocurrencies, the latest market estimates point to a figure of no less than three trillion dollars, which represents approximately the aggregate sum of the GDP of Italy, Portugal and Greece.

    “Part of that investment is estimated to be leveraged, which raises the risk of erraticity of the quotes not only of bitcoin and ethereum, which are the best known and capitalized cryptocurrencies, but those of the total of about 2,000 existing ones, “warn the experts of Bankinter.

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