• Sunday, June 23, 2024
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Bitcoin price retreats on profit-taking, regulatory fears


The price of bitcoin was trading below $39,000 on Tuesday after nearly a week it went on a bull run hitting an intraday high of $42,388.

Before the price surge, the crypto had traded within the range of $30,000 and $40,000 for over two months.

The price drop is primarily a result of speculative traders taking long-awaited profits from the market. Speculators still dominate the market despite the influx of institutional investors and long-term investors growing.

Read also: Global markets report: Oil heading for $60 as stocks push for fourth day of gains

According to a weekly report by Glassnode investors took over $2 billion in profits.

“We can see that after a long period of elevated losses being realised in May to July (pink), this week over $2 billion in profits were realised on-chain (7-day median). This suggests there is some portion of the market who spent their profitable coins, potentially taking exit liquidity,” Glassnode noted.

It is also possible that demand for the crypto has reduced after Amazon clarified that while it may be interested in cryptocurrencies, enabling the technology in its payment system might not be this year. Several reports have claimed that the biggest eCommerce platform in the world was planning to add cryptocurrency as a mode of payment. First, it started with an ad from Amazon hiring crypto experts.

The market may have also reacted to comments by Gary Gensler, chairman of the US Securities and Exchange Commission in which he asked the US Congress to give it more powers to tame the market.

“While I’m neutral on the technology, even intrigued—I spent three years teaching it, leaning into it—I’m not neutral about investor protection,” said Gensler, who on Tuesday gave a speech about crypto at the Aspen Security Forum. “If somebody wants to speculate, that’s their choice, but we have a role as a nation to protect those investors against fraud.”

Gensler is hoping that Congress would grant the SEC power to oversee crypto exchanges in the United States. The goals, he said, are to protect the investor, facilitating capital formation, and ensuring fair markets.

“This asset class is ripe with frauds, scams, and abuses in certain applications,” he said. “In many cases, investors aren’t able to get rigorous, balanced, and complete information.”

However, some analysts have said the price pullback could be an indication of some maturity level that could eventually put it on course for another bull run perhaps to above $50,000.

“We expect the pullback to mature in one to two weeks near the 50-day moving average around $34,000, after which bitcoin is likely to clear $42,600 for a revised upside target near $51,000,” Katie Stockton, managing director of Fairlead Strategies, wrote in a Monday newsletter.

Some analysts expect prices to recover as more institutional investors come into the market. Apart from Amazon’s interest, Exxon Mobil is reportedly planning to buy $5 billion worth of bitcoin and might also start accepting Bitcoin Lightning in the fourth quarter of 2021. The oil and gas giant is also reported to be using excess flare gas to mine bitcoin.