Home » Cryptocurrencies are behaving more like gold as volatility eases: Here’s why

Cryptocurrencies are behaving more like gold as volatility eases: Here’s why

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DUBAI: Cryptocurrencies have consistently shown an unusual lack of volatility, bringing such price stability amid growing correlation between top cryptocurrency Bitcoin and gold prices. .

“The largest cryptocurrency has mostly fluctuated between price levels of $19,000 (Dh70,000) and $20,000 (Dh73,500) since the beginning of September. Bitcoin, once synonymous with volatility ,” said UAE’s Brian Deshell. based cryptocurrency trader and analyst.

“The big picture has become more and more important for Bitcoin this year. Whenever market momentum seems to wane, stocks and cryptocurrencies have held their gains in much the same way, with more gains than usual. is also a good investment.”

Rampant inflation this year has prompted central banks around the world to aggressively tighten financial conditions and raise interest rates, increasing the likelihood of a recession as a result. This pessimistic macro outlook has contributed to crypto trading in correlation with other risk sensitive assets like stocks.

Stocks and cryptocurrencies alike hold most of their gains whenever market momentum seems to wane, making them better-than-usual investments.

– Brian Deshell

Bitcoin volatility drops significantly

Bitcoin has fallen more than 70% from its all-time high almost a year ago, prompting analysts to retest the June low of around $17,000 (Dh36,731) to find a new value. We expect cryptocurrencies to fall even further. If it fails to hold at $19,000 (Dh69,788), it can drop to $10,000 (Dh36,731).

Bitcoin hit multiple all-time highs in 2021 and then fell sharply, but even more major companies embarked on acquisitions. It slipped below $900 (Dh3,305) in June, the lowest level since 2021.

“The first half of 2022 has been very bad for the cryptocurrency market. Bitcoin and Ethereum are down more than 50% from their all-time highs in the second half of 2021. We have seen slight gains in recent weeks. However, the cryptocurrency market has stalled significantly,” added Deshell.

“In the meantime, people’s interest in cryptocurrencies remains high. It’s a hot topic not only among investors, but also in popular culture. Longtime investors and billionaires like Elon Musk We have been advocating for cryptocurrency thanks to a strong cryptocurrency hero, a widely accepted digital asset.”

Global financial technology companies are also betting on crypto by allowing users to make purchases on their platform while at the same time accepting payments made in Bitcoin. Experts predict that this buy-in will continue to grow.

More Global Acceptance Helps Recovery

Mainstream companies across multiple industries are taking interest globally, with some investing in cryptocurrency and blockchain in 2021 and even more in 2022.

Global financial technology companies are also betting on cryptocurrencies by allowing users to make purchases on their platforms and also accept payments in Bitcoin. Experts predict that this buy-in will continue to increase, resulting in more stable prices.

“Currently, paying in cryptocurrencies makes no sense for most people, but that could change in the near future as more global retailers accept payments,” added Deshell.

“Although we believe there is still a long way to go before using Bitcoin for goods and services to become a wise economic decision, further institutional adoption will lead to more use by everyday users. A case could be brought in, which in turn could affect the world.Crypto prices.

“Nothing is guaranteed, but if you buy cryptocurrency as a long-term store of value, the more it is used in the ‘real world,’ the more likely it will grow in demand and value.”

We still have a long way to go before using Bitcoin for goods and services is a wise economic decision.

– Brian Deshell

Impact of Recent Currency Volatility on Cryptocurrencies

One of September’s biggest market catalysts was the plunge in the British pound. The UK’s aggressive new economic stimulus package, including tax cuts and investment incentives, caused the market to fall, while a quick reversal in policy stance fueled a rapid market recovery.

After the pound fell to record lows against the US dollar, central banks had to step in and stem losses with drastic measures to prevent the rapid depletion of government coffers. But how does such volatility in major global currencies affect cryptocurrency prices?

“Uncertainty and volatility in fiat currencies could boost cryptocurrency markets in the long term. There was a lack of trust,” said Brody Dunn, investment manager at the UAE-based wealth advisory firm.

What does “fiat currency” mean?

“Fiat currency” is a Latin word that means an authoritative decision. In this case, it is the government that determines the value of the currency and does not represent another asset or financial instrument such as gold or checks.

Familiar examples of fiat currency include pounds, euros, and US dollars. In fact, very few of the world’s currencies are truly commodity currencies, and most are in some form of fiat money.

Bitcoin is not legal tender as it is not a legal tender issued by a government. Bitcoin is a cryptocurrency backed by blockchain technology and free from central authorities.

“This raises the idea that cryptography can provide a solution to this mess, and is a way out of relying on the choices of a few individuals to provide financial stability.

“Unfortunately for crypto investors, however, the recent strength of the U.S. dollar suggests that investors are more concerned about a possible downturn in the global economy, and they still see the U.S. dollar as the safest bet. I have.”

Cryptorich

With demand and acceptance seemingly peaking, regulation of cryptocurrencies is fast approaching not only to gain an edge in the game, but also to protect investors from potential future losses. .

Cryptocurrency regulation is moving faster than ever

With demand and acceptance seemingly peaking, regulation of cryptocurrencies is fast approaching not only to gain an edge in the game, but also to protect investors from potential future losses. .

Dunn, who has been trading cryptocurrencies since 2010, said, “After the recent devastating crash in the cryptocurrency market, it is clear that stricter regulations could be introduced soon.

While several central banks around the world have hinted that they have no intention of banning cryptocurrencies, there are various bodies that may or may not have jurisdiction to oversee everything. “

Analysts reiterate that clear regulation means that major roadblocks for cryptocurrencies will be removed. Investors are currently operating without clear guidelines. As such, cryptocurrency regulation can be a hot topic, but many experts say it’s a good thing for investors and the industry.

“More regulation could mean more stability in the notoriously volatile crypto market. It also has the potential to provide clear guidance on how to

“Regulatory announcements may also have a positive impact on the price stability of cryptocurrencies in an already volatile market, but market volatility is pushing crypto investment to less than 5% of total portfolios. That’s why we advise you to be conservative and never invest in anything you can’t afford to lose.”

How did cryptocurrency regulation start in the United Arab Emirates?

Until recently, there were no specific regulations governing cryptocurrency activities in the UAE. However, now the Securities and Commodities Authority (SCA) continues its attempts to develop a legal framework for cryptocurrencies on the mainland.

In October 2019, the SCA published its draft crypto-asset regulations for stakeholder review and comment. A year later, in December 2020, the decision on the Crypto Assets Activities Regulation (Regulation) was published.

This time, for the first time in the UAE, the regulator has set regulatory parameters under which cryptocurrency exchanges for trading will be licensed and operated, particularly with respect to offering cryptoassets and tokens on the mainland, as well as operating crypto-funding platforms. did. .

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