What has happened to Bitcoin? Just a few weeks ago, on April 15th, the cryptocurrency was trading at $63k. On Tuesday, it traded as low as $31k, more than a 50% fall from its peak. It has fallen nearly 8% over the last week and not even the Miami Bitcoin conference this past weekend could help its free fall. The latest pullback comes over concerns over security of Bitcoin, after the FBI managed to recover most of the ransom paid to hackers that targeted Colonial Pipeline. It is also a sign that regulators are stepping up efforts to battle Bitcoin ransomware attacks. Bitcoin is now up only 12% since the start of the year.
While Bitcoin makes payments easier across borders, it does have a security problem. Unlike credit-card purchases, crypto transfers generally can’t be reversed and just need a wallet address for the transfer. According to FTC, consumers have lost $82 million to crypto scams just in the last two quarters, more than 10x the same amount from the same period a year earlier. The FTC figures are based on self-reporting by victims and limited to the US so the actual number could be a lot higher.
The Bitcoin descent began when the decentralized world’s most centralized figure, Elon Musk tweeted on May 12 that Tesla would no longer accept Bitcoin over environmental concerns. That was followed by China cracking down on cryptocurrencies, banning financial institutions from accepting them. Trump also got in on the action on Monday, saying Bitcoin “seems like a scam” and competes with the US dollar, which instead should be the currency of the world.
Short Squeez Takeaway: Late last night, there was some good news for the Bitcoin faithful as El Salvador became the first country to pass a law to adopt Bitcoin as legal tender. There are no fundamentals we can rely on to gauge a fair value for Bitcoin, price largely depends on investor sentiment, which changes by the second. One thing is for sure, crypto investing is not for the faint-hearted (7 times more volatile than the stock market over the last month) so be careful where you put your money and sanity to work.