Regulatory Impacts
Bitcoin and cryptocurrencies in general have been in the news in recent weeks due to the clamp down China is having on the industry. China has been aiming to shut down the energy-intensive crypto mining operations and ordering businesses not to work with cryptocurrencies.
Further to this, the UK regulators banned Binance, one of the leading exchanges for digital currencies. It should be noted though, that this merely bans Binance from starting regulated activities within the UK. It does not stop UK residents from using Binance.
Last year, Donald Trump’s administration put forward an anti-money laundering rule which meant anyone making transactions of $3,000 or more in a private digital wallet would have to undergo identity checks.
All of these pressures on the regulation of Bitcoin and other cryptocurrencies have led UBS to state that they’ve long been warning that regulatory crackdowns could lead to a bubble pop in the crypto markets.
Environmental Concerns
Elon Musk brought the identification of concerns of Bitcoin’s environmental impact to the forefront. Bitcoin’s critics have long spoken about the negative carbon footprint which vast Bitcoin mining can cause. This has just been emphasised by the fact that Musk’s company, Tesla, backtracked on their $1.5billion investment in utilising Bitcoin as a core payment method, to completely taking it out as an option.
The environmental impact of Bitcoin has certainly been called into question by some asset managers, with a growth in ESG policies in the finance world, many investors are seeking to avoid investments which negatively impact the environment. If this problem isn’t solved for Bitcoin, it could lead to many investors ultimately avoiding it and seeking alternative cryptocurrencies.
Volatility
Bitcoin has seen significant swings in its price, alongside most other coins. Bitcoin saw an all time high this year of $64,829. However, it has been tumbling down since then, and even slid below $30,000.
Looking simply at the gains Bitcoin has made, it is still up more than the S&P 500 year-to-date. However, the significant swings and ability to suddenly drop in a relatively short space of time could lead to some larger investors avoiding it as a significant risk, certainly for those looking for more short term investments.
UBS stated that there is limited real world use, and due to the volatility of the price, it is primarily used by individuals to make speculative gains.
Scams and ‘Meme coins’
Huge levels of speculation in the crypto markets have been seen this year, seemingly with a new coin promising 1,000%+ returns popping up each and every week.
‘Dogecoin’ which started off as a joke surged wildly this year to record highs, even being promoted and pushed by Elon Musk. The level at which these ‘memecoins’ can be manipulated by simple social media posts has led to many staying far away from them, and the negative association of this manipulation has the potential to also spread to Bitcoin.
There was a point this year where Dogecoin was worth more than Ford, amongst other US companies. However, since the price was pumped up by tweets from Musk, it has since depreciated significantly.
