A sharp rise in bitcoin prices pushed the cryptocurrency above $30,000 (£24,118) for the first time since June 10 last year, just before crypto lending firm Celsius took to the streets. freezes withdrawals in anticipation of its collapse.
Even given this rally, the token is still well below its all-time high of $68,000 in November 2021, and well below where it was before the failure of the stablecoin Terra caused “winter crypto".
Nonetheless, the recent steady rise in bitcoin's value has sparked talk of another cryptocurrency boom — and reignited fears of widespread market manipulation.
The collapse of Silicon Valley Bank last month and the wider contagion it unleashed on financial markets has led some cryptocurrency fans to turn to bitcoin, the industry's original and most valuable token, as a way to hedge against fears that the entire traditional "fiat" economy would collapse.
This attitude was exemplified by American venture capitalist Balaji Srinivasan, who in March bet $1 million that the price of a single bitcoin would surpass $1 million by June this year. His assertion was that the US dollar would soon experience hyperinflation, causing the dollar value of bitcoin to skyrocket.
Questions and answers
What is bitcoin?
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Bitcoin is a "cryptocurrency" - a decentralized tradable digital asset. Invented in 2008, you store your bitcoins in a digital wallet and transactions are stored in a public ledger known as the bitcoin blockchain, which prevents dual digital currency from being spent.
Cryptocurrencies can be used to send transactions between two parties through the use of private and public keys. These transfers can be made with minimal processing cost, allowing users to avoid fees charged by traditional financial institutions – and the oversight and regulation that entails. The absence of any central authority oversight is one of the attractions.
This means that it has attracted a range of backers, from libertarian monetarists who like the idea of a currency without inflation and without a central bank, to drug traffickers who like the fact that it is difficult (but not impossible ) to trace a bitcoin transaction. to a natural person.
The exchange rate has been volatile, with some viewing it as a risky investment. In January 2021, the UK's Financial Conduct Authority warned consumers that they should be prepared to lose all their money if they invest in schemes promising high returns from digital currencies such as bitcoin.
In practice, it has been much more important for the underground economy than for most legitimate uses. In November 2021, it hit an all-time high of over $68,000 as a growing number of investors backed it as an alternative to other assets during the Covid crisis.
Bitcoin has been criticized for the system's vast energy reserves and associated carbon footprint. New bitcoins are created by "mining" coins, which is done by using computers to perform complex calculations. The more bitcoins that have been "mined", the longer it takes to mine new coins, and the more electricity is used in the process.
“This is when the world rebrands bitcoin as digital gold, returning to a pre-20th century-like model,” he tweeted, explaining the bet. “It will all happen very quickly once people check what I say and see that the Federal Reserve lied about how much money there is in the banks. All dollar holders are destroyed.
Alex Adelman, managing director of bitcoin rewards app Lolli, said Monday's rally "had no clear catalyst" but was "an indicator of new bullish market conditions in the bitcoin and strong investor confidence". Bitcoin's continued strength suggests that bitcoin is emerging from the so-called "crypto winter" into a new phase of strength and renewed interest from retail and institutional investors.
But the recovery, after bitcoin prices hovered at $28,000 for nearly a month before surging to the final $2,000 in one day, also raised concerns about market manipulation.
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Questions and answers
What is a stablecoin?
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A stablecoin, as the name suggests, is a type of cryptocurrency believed to have a stable value, such as $1 per token. How they achieve this varies: the major ones, such as tether and USD Coin, are actually banks. They hold large reserves of cash, liquid assets, and other investments, and simply use these reserves to maintain a stable price.
Others, known as "algorithmic stablecoins", attempt to do the same but without any reservations. They have been criticized as being effectively backed by Ponzi schemes, as they require continuous inflows of cash to ensure they don't collapse.
Stablecoins are an important part of the cryptocurrency ecosystem. They offer investors a safer place to store their capital without having to cash out entirely, and allow assets to be denominated in conventional currency, rather than other highly volatile tokens.
A 2022 report from the US National Bureau of Economic Research found that “wash trading,” the practice of selling cryptocurrencies between related parties to influence the reported price, averaged “more than 70% of reported volume” on 29 unregulated exchanges.
In June 2022, the United States Securities and Exchange Commission (SEC) denied approval to launch a bitcoin-linked exchange-traded fund, which would allow investors to buy exposure to the cryptocurrency on stock markets. public, after concluding that the fraud cannot be prevented. and market manipulation to affect the price.
In addition to fictitious trading, the SEC said the market could be influenced by individuals with a "dominant position" in bitcoin manipulating its prices, fraud and manipulation on trading platforms, and manipulation activities. involving stable parts "including fasteners".