Bitcoin (BTC) commenced another rally in the second week of June, continuing a trend of reversals that left the market reeling. While larger market cap coins followed suit, the altcoin market failed to recover to the same degree. This uncoupled price action will be familiar to veterans of the 2018 crypto winter – as Bitcoin slowly oscillated down to the cycle’s low, many altcoins never recovered. While it is too early to determine the market’s overall trend, a failure to recover beyond recent highs leaves the entire market in a perilous position.
Leading last week’s sell-off, miners dumped 5,000 BTC into the market. Although not immediately indicative of a problem, this high level of sell pressure can be difficult to overcome – another such action could see Bitcoin’s recent rally stunted. However, there is also the possibility that the cryptocurrency market could decouple from BTC entirely – a long anticipated event based on higher utility in altcoins. Institutional interest in Ethereum continues to grow, with some expecting it to eclipse Bitcoin sooner rather than later.
Bitcoin: Governmental Action Looms
In another repeat from 2018, governments across the world began to consider legislative action either for or against cryptocurrencies. The industry’s prominence in media drives such scrutiny – and once again, China leads the way with a potential cryptocurrency ban. In mid-May, they banned financial institutions and services from dealing with cryptocurrency in an attempt to reassert internal influence over their citizens. Meanwhile, a potential ban in India collapsed, pivoting to a more positive asset classification. In a more understandable move, Iran’s ongoing power generation issues led to the country banning mining for the next few months.
In contrast, the country of El Salvador embraced Bitcoin as legal currency. This led to a showing of approval from multiple Central and South American nations – suggesting that they may follow suit in the near future. El Salvador’s adoption appears to be the catalyst that caused the recent rally – and may very well have reversed Bitcoin’s downward trend.
The Colonial Pipeline Ransom
Last month’s Colonial Pipeline hack ended with a ransom paid entirely in Bitcoin. Now, the FBI says they’ve recovered the vast majority of the ransom payment. Although clearly good news, the way in which major media reported this news managed to help tank Bitcoin’s price – albeit temporarily. Although it is well known within the cryptocurrency industry that Bitcoin is transparent and eminently traceable, the general public did not think so.
This shaken, misplaced confidence led to a belief that the Bitcoin was, in effect, counter-hacked to aid the recovery. It is far more likely that the FBI seized the BTC as it passed through an exchange, tracing it from the point of the ransom as it moved through the blockchain. Bitcoin remains as secure as ever.