Premarket Stocks: Is Bitcoin Winter Thawing?

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It’s been a cold, harsh crypto winter. But signs of a thaw fueled by global currency chaos are starting to appear.

What is happening: Bitcoin rose to its highest level in more than a week on Tuesday, gaining more than 5% as the British pound and other currencies lost ground against the ultra-strong dollar. The gains gave cryptocurrencies hope that bitcoin could serve as a safe-haven asset or hedge when stocks fall.

Then by mid-afternoon, the dollar rallied and bitcoin crashed again, wiping out all of its recent gains. Bitcoin lost another 1% on Tuesday after the Bank of England tried to shore up UK debt.

“There are no safe havens” when the dollar is strong, eToro cryptocurrency advisor Glen Goodman warned on CoinDesk TV on Tuesday.

Some background: Bitcoin struggles for direction: The digital currency has been hovering between $18,000 and $25,000 since mid-June. He now it has decreased by 60% year-on-year.

The coin has soared on the wings of near-zero interest rates, stimulus cash and massive investor inflows from large-scale institutions during the Covid era, reaching a record high of around $70,000 in November.

Then central banks began raising rates to fight inflation, and the dollar strengthened significantly, luring investors as a last-ditch safe haven. At the same time, the economy began to deteriorate and new investors still viewed bitcoin as a risky asset came out in droves. The crash triggered a wave of bankruptcies among young companies such as cryptocurrency trading platforms Voyager and Celsius.

“In the current macro climate, when you have inflation, a big sell-off, and big crypto projects that fail, people are going to pull back,” Tyler Winklevoss, co-founder of cryptocurrency exchange platform Gemini, told me in an interview earlier this month. “Bitcoin is still new, so many still see it as a risky asset. Bitcoin will suffer as people take risk off the table. But all assets suffer, and bitcoin is not the only one.”

The silver lining: But even as bitcoin prices fall, investors see signs of a downside.

Ben Gagnon, chief mining officer at Bitfarms, sees anything below $20,000 as a fair-weather price for institutional investors to withdraw from the currency for good, which will help stabilize bitcoin’s current volatility and push it higher.

As of Wednesday morning, bitcoin was below $19,000.

“I’d be very surprised if we finished the year that low,” Gagnon said. “I think Bitcoin is going to start recovering now because it’s kind of shaken out of excess.”

“It’s an exciting time,” said Chris Kline, COO and co-founder of Bitcoin IRA, a digital asset technology platform. “For the past eight months, bitcoin has been performing like a tech stock because there are so many institutional investors.” As that money flows in, he said, things could change.

That’s a big TBD, but bitcoin supporters remain cautiously optimistic.

Crypto advocates aren’t too happy with the Federal Reserve, and that sentiment goes both ways.

On Tuesday morning, Fed Chairman Jerome Powell called for more regulation of digital assets at a Bank of France conference on the digitization of finance.

While cryptocurrency bulls argue that the decline in markets and other assets is causing digital currencies to fall in value, Powell says he worries the opposite is true. The final descent in bitcoin prices, he said, could spread and lead to wider financial turmoil. Digital currencies need to be regulated and have checks like other market assets, he said.

“There is a real need for more appropriate regulation,” he said, especially as cryptocurrency “expands and begins to touch more retail customers.”

Other central bankers were not as nuanced as Powell. “I don’t see any redemption value in cryptocurrencies,” said Ravi Menon of the Monetary Authority of Singapore. “Their time of reckoning has come.”

The Federal Reserve does not regulate cryptocurrency in the US, but it does monitor cryptocurrencies held by banks. The central bank is also considering issuing a Central Bank Digital Currency, a digital version of the dollar.

That currency isn’t coming anytime soon, Powell said. “We see this as at least a several-year process where we do the work and build public confidence in our analysis and our final conclusions, which, as I said, we’re certainly not there yet.”

Representatives Maxine Waters and Patrick McHenry try to negotiate. draft law Act It would regulate the companies behind stablecoins – digital assets pegged to the dollar and used as an alternative to the high volatility of cryptocurrencies like bitcoin.

The bill would subject them to Federal Reserve supervision and reserve requirements to protect customers in the event of a bankruptcy — the type of regulation that Fed Chairman Powell called for on Tuesday.

But the box keeps getting kicked down the road. Politico reports that Congress “has not decided how to draft the text of the bill.” They are struggling to figure out how to regulate cryptocurrency.

“I don’t think anyone would suggest that someone who doesn’t know or isn’t familiar with the industry is in a position to legislate and regulate,” said Ben Gagnon, who has reached out to politicians to defend cryptocurrency company Bitfarms.

“There have been some federal government initiatives by agencies to study bitcoin, but that process is largely non-existent,” he said.

The White House recently unveiled its plans for crypto regulation, but critics have argued they lack real teeth. The Blockchain Association, one of the largest digital asset industry groups, said the Biden Administration’s report lacked “reasonable recommendations.”

Executive director Christine Smith said in a statement that the report focused heavily on criticism of the industry and played light on politics. He called the reports “a missed opportunity to solidify US cryptocurrency leadership.”

Cintas ( CTAS ) and Paychex ( PAYX ) report earnings ahead of the call.

Expected US home sales will be released at 10 a.m. ET.

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