27.12.2021 – The swan song for Bitcoin, Ether and co. continues. But cryptos are holding their own so far. We look ahead and report the most important current market factors. Bull versus bear – we shed light on the background.
Push factor inflation
Let’s start with the bullish arguments first. Clearly, inflation is supporting demand for alternatives to the dollar, euro or pound. Central banks are pushing down interest rates, and bond purchases in Europe and the USA are continuing. Ergo, the money supply is increasing. If you don’t want monetary policy to wipe out savings, you need an asset that can’t be manipulated. Most analysts currently assume that inflation will stay with us for a while. At some point, to be sure, the flood of money will be throttled back. But the shock to the supply chain caused by Corona is likely to keep prices up.
Venture capital goes crypto
The blog “The Market Ear” was correspondingly optimistic for the bulls: according to it, around $30 billion in venture capital flowed into e-currencies in the past year 2021. That is almost four times the amount from 2018 – when Bitcoin brought in a fabulous return of 1,300 percent. It added: “The number of crypto-tracking investment vehicles worldwide more than doubled to 80 from just 35 at the end of 2020, according to Bloomberg Intelligence data. Assets soared to $63 billion, compared to $24 billion at the start of the year.”
A bearish argument against cryptos is cyber crime: no one knows what percentage of demand hackers represent. All that is certain is that IT crimes are booming. And that e-currencies are more often paid as ransom in extortion. And that the West is taking stronger action against cyber gangs because the wave of attacks on high-tech corporations, industrial companies, government agencies and hospitals is no longer acceptable. Hesse recently provided an example of why this could put pressure on the price of digital currencies: The Central Office for Combating Cybercrime (ZIT) of the Frankfurt Prosecutor General’s Office disposed of confiscated cryptocurrency from drug deals. The sale brought in around 100 million euros for the Hessian treasury.
Confusing signals from Moscow
For a similar reason, a price freeze could soon reach us from Moscow: The Russian Central Bank wants to enforce a ban on cryptos, Reuters reported in mid-December, citing insiders. Russia argues with money laundering and terror financing. Cryptos still have a legal status, but they may not be used as a means of payment. In addition, Russia probably wants to introduce a digital ruble. Not only Moscow could act in this way – uncontrollable competitors to its own currency are also a thorn in the side of other governments. But officials are standing in their own way, as Cointelegraph medet: While Russian Central Bank chief Elvira Nabiullina wants to enforce that no cryptos are allowed to be traded in the Russian financial system at all, Vice Vladimir Chistyukhin says that Russians can very well trade cryptos via foreign companies, he recently told the TASS news agency.
Things will get exciting on New Year’s Eve
The only thing that is clear is that things will remain volatile – turbulence could emerge right on New Year’s Eve: The blog “Bithedge” informed that on December 31, crypto options worth $8.2 billion will expire. This sum exceeds the previous record of 5.6 billion during the bull market in the spring. The bulk of the current sum is in bitcoin at 5 billion, it said. The blog commented that the unexpected size of the closures in the middle of the vacation season could make for some fluctuations.
Investors must always be aware that they are on a roller coaster for another reason as well. That’s because, according to “Crypto.com,” only 0.01 percent of bitcoin holders control about 27 percent of e-currencies. One call among friends – and a small group can easily drive the price up or down. We keep an eye on this fascinating market – Bernstein Bank wishes successful trades and investments!
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