All the indicators are red today and seem to point to a fall in cryptocurrencies as a whole. Bitcoin (BTC) has collapsed below €27,000 ($33,000), down 15% in just a few hours. Ether (ETH) followed suit. While the star of cryptocurrencies was recovering, what could be the causes of this fall? A look back at the latest world news impacting cryptocurrency prices.
The United States and Biden
On 20 May, Joe Biden, President of the United States, announced that he wanted to include cryptocurrencies in his tax reform package. On the agenda: companies receiving sums in cryptocurrencies will be required to declare them in excess of $10,000. The cryptocurrency market plummeted as soon as these measures were announced.
Cryptocurrency on the G7 agenda this weekend
The famous G7 summit will take place this weekend, from Friday 11 to Sunday 13 June. It will be the occasion for a first-ever tête-à-tête between French President Emmanuel Macron and the US President. But on Monday, Jack Sullivan, Joe Biden's national security adviser, said that cyber security must be a priority for NATO and the G7 countries. Although it is unlikely that Biden will announce any concrete measures, the role of cryptocurrencies in ransomware will undoubtedly form part of the discussions. Once again, this announcement has the potential to panic the market and trigger a fall in cryptocurrencies.
Biden at the G7
Goldman Sachs blasts Bitcoin
Bitcoin is seen as digital gold
In the United States, inflation is still high, despite reassuring employment figures. Faced with the depreciation of fiat currencies, and the dollar in particular, Bitcoin has for some months been seen as a solution for some investors. In fact, the computer code provides for the production of BTCs to be limited to 21 million. The 18 million already issued make it a rare, and therefore expensive, asset. Bitcoin is seen as a kind of digital gold.
Goldman Sachs compares Bitcoin to copper
But on 1 June, Jeff Curie, Global Head of Commodity Research at Goldman Sachs, gave an interview on the US television channel CBNC. In this interview, he pointed out that BTC is a risk-on asset, whereas gold is a risk-off asset. The analyst bases his explanation for this difference on market history and traders' investment strategies. In his view, investors turn to Bitcoin and cryptocurrencies when the indicators are green, and to gold when the indicators are red. For Jeff Curie, BTC is more akin to copper.
Fears of increased repression in China
On the other side of the world, China, the empire of opacity and information control, is not reassuring the cryptosphere either. Control of monetary policy and financial systems is essential for a central government. Bitcoin clearly appears to be a threat to China's authoritarian regime. The crypto-currency is consolidating its place and appears to be becoming a valuable store of value for people around the world. Could it be that China's measures are designed to make the downfall of crypto-currencies a long-term reality?
Mining at the heart of the problem
This great country is also the world's largest host of mining farms. According to the Cambridge Center for Alternative Finance , BTC mining in the Asian empire accounts for 65% of the global process. The environmental impact of using fossil fuels to mine cryptocurrencies is at the heart of the Chinese government's measures. It wants to ban farms from its country. The main mining companies are announcing that they are getting out and looking elsewhere for a place to set up. But in a world where ecology is becoming increasingly important, is there a country where the particularly energy-hungry farms of the bitcoin network could be welcome?
Ecological mining
Chinese social network Weibo suspends accounts linked to cryptocurrencies
More recently, the crackdown is gathering pace. Chinese social network Weibo – a mix of Twitter and Facebook in China – is suspending accounts linked to cryptocurrencies. According to a Chinese journalist who posts news from his country on his Twitter account, the Chinese propaganda department monitors social networks, so Weibo is reportedly working closely with the government to block influencer accounts that talk about "BTC", "Bitcoin", "cryptocurrency" or "blockchain".
In the UK too, announcements that are shaking up the market
UK-based asset management company Ruffer Investment Management is in the news these days. It claims to have made $1.1 billion in 5 months from its investment in BTC. In reality, the company has sold its Bitcoins, acquired last autumn. The pandemic and Covid 19-related measures are the reasons given by Ruffer. In fact, the company considers that the confinement measures are being lifted one after the other and that, as a result, young people will spend less time trading crypto-currencies.
Conclusion
The governments of the world's major economic powers seem to be ganging up on cryptocurrencies, Bitcoin in particular. The economic world, shaken by the Covid 19 crisis, is unsure how to respond to the cryptocurrency craze. Worrying inflation in the United States and the impression that the crypto universe is spiralling out of control are leading Western governments to put the subject of crypto-currencies on the table. China's response, meanwhile, is as repressive as the country is authoritarian.
President of Salavdor
But there is some good news: the President of El Salvador wants BTC to become a legal currency in his country. This is what he said this weekend in a video broadcast at the Bitcoin 2021 conference in Miami. He announced that the country was joining forces with Strike, a specialist in digital wallets, to set up a suitable financial infrastructure. He will also propose a bill to give bitcoin legal status in the country. His photo with the laser-red eyes, which he posted on his Twitter account, clearly shows his interest in BTC. Clearly smaller countries are more encouraging of cryptocurrencies. It's strange… or not!
