Bitcoin price falls below $40,000, shattering analysts $100,000 midyear forecast
Bitcoin price falls below $40,000, shattering analysts' $100,000 midyear forecast
Bitcoin's chances of reaching analysts' forecast of $100,000 by the end of the year have diminished significantly after it fell below $40,000 on Wednesday.
The world's most popular currency fell more than 10% after China announced that cryptocurrencies would be prohibited in transactions and warned investors against speculative trading in them.
This decline follows Elon Musk's Tesla announcement last week, which sent the cryptocurrency's price plummeting to $52,466. Likewise, it resulted in the wipe out of approximately $350 billion from the cryptocurrency market.
China clamps down again
China's latest cryptocurrency ban is not the country's first. Since 2017, the Asian technology capital has prohibited cryptocurrency trading. The government closed its domestic cryptocurrency exchanges, effectively suffocating a speculative market that accounted for 90% of global Bitcoin trading.
The country's regulatory bank announced in June 2019 that it would block access to all domestic and foreign cryptocurrency exchanges and initial coin offering websites. The goal is to prohibit all cryptocurrency trading and to prohibit foreign exchanges.
Financial institutions, including banks and online payment channels, are now prohibited from offering clients any service involving cryptocurrency. Registration, trading, clearing, and settlement are just some of the services available.
This regulation is similar to the one enacted by Nigeria's Central Bank, which prohibits banks from allowing accounts to trade cryptocurrency in the country. This means that while individuals are not prohibited from owning cryptocurrencies, purchasing them directly will be extremely difficult.
Analysts’ price forecast of $100,000 by midyear in peril
After Bitcoin's price reached $40,000 for the first time this year, analysts and experts forecasted that it could reach $100,000 by mid-2021.
According to JPMorgan, Bitcoin's 300 percent gain in 2020 could be replicated this year, with the price rallying to $100,000. Similarly, Estes anticipates that Bitcoin will reach a value of between $100,000 and $288,000 by the end of 2021.
However, the heinous events of the last few days have shattered the predictions. Bitcoin fell from $45,600 to $33,538 on Wednesday, its lowest level since the start of the year and well below the April record high of $64,870.
Following the decline, some analysts are warning that it could fall as low as $30,000, while others believe it will rally and continue to rise. Munachi Ogueke, Yellow Card's Chief Business Officer, told this correspondent that he believes Bitcoin will continue to rise. He did, however, emphasize that this is not investment advice.
More troubles ahead?
Bitcoin has lived up to its volatility claims over the last few days, with the drop following Elon Musk's and China's announcements. If the current trend continues, the cryptocurrency sector is on the verge of another upheaval.
According to reports, the US is developing a regulatory framework for cryptocurrency. This could mean a variety of things, ranging from circumventing existing laws and restrictions to governmental oversight and enforcement of space transparency.
However, the listing of one of the world's largest cryptocurrency exchanges, Coinbase, on the US stock exchange is a strong indication that regulators are extremely receptive to the potential of crypto and may refrain from enacting regulations that would harm it.
In conclusion, complaints about cryptocurrency's volatility are finally catching up with skeptics. According to Chinese regulators, the coins' volatility "significantly undermines people's asset security and disrupts normal economic and financial order."
While prohibiting its use, the regulator warned consumers against wild speculation, noting that "losses resulting from investment transactions are borne by the consumers themselves" due to the lack of consumer protection under Chinese law.
However, Bitcoin is not unfamiliar with plunges. The coin has seen worse in its long history. While the direction remains downward at the time of writing, there is a strong possibility that it will recover. However, the early forecast of $100,000 by midyear now appears highly improbable.
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