The chances of Bitcoin hitting analysts’ forecast of $100,000 at the end of the year has hit the wall after its price fell below $40,000 on Wednesday.
The price of the world’s most popular currency plunged more than 10 per cent after China said cryptocurrencies would not be allowed in transactions and warned investors against speculative trading in them.
Bitcoin price fell to $33,538.10 for the first time in more than three months
This drop comes after Elon Musk’s Tesla announcement sent the cryptocurrency price tumbling down to $52,466 last week. It also triggered a wipeout of about $350 billion from the crypto market.
China clamps down again
The latest cryptocurrency ban in China isn’t the first. The Asian tech capital has banned trading in cryptocurrencies since 2017. The government shut down its local cryptocurrency exchanges, smothering a speculative market that had accounted for 90% of global Bitcoin trading.
In June 2019, the country’s regulatory bank announced that it would block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites. The aim is to clamp down on all cryptocurrency trading with a ban on foreign exchanges.
Under the latest ban, financial institutions including banks and online payments channels, must not offer clients any service involving cryptocurrency. These services include registration, trading, clearing and settlement.
China seeks to promote its own heavily regulated digital yuan, which it is testing across the country in pilot schemes.
This regulation is similar to Nigeria’s CBN preventing banks from allowing accounts to trade cryptocurrency in Nigeria. This means that while individuals are not barred from holding cryptocurrencies, it will be very difficult to buy directly.
Analysts’ price forecast of $100,000 by midyear in peril
After Bitcoin price surged to $40,000 for the first time this year, analysts and experts started projecting that the price could reach as high as $100,000 by mid-2021.
According to JPMorgan, Bitcoin’s 300% surge in 2020 could be replicated this year, with price rallying as high as $100,000. Similarly, Estes predicts that Bitcoin could hit between $100,000 and $288,000 by end-2021.
However, the torrid occurrence these last few days has all but shattered the predictions. Bitcoin tumbled Wednesday from $45,600 to $33,538, its lowest since the beginning of the year, and well off the record high of $64,870 seen in April.
Following the drop, some Analysts are warning that it could go down as far as $30,000 while some other think it would rally again and shoot even further up. Munachi Ogueke, Chief Business Officer at Yellow Card told this correspondent that he believes that Bitcoin will still rise. He however, pointed out that it is not an investment advise.
More troubles ahead?
Over the last few days, Bitcoin has lived up to claims about its volatility with the drop following Elon Musk’s and China’s announcement. If the trend continues, the crypto sector is on the verge of more shaking up.
Reports have revealed that the United States is working on a regulatory framework for cryptocurrency. This could mean a host of things from penetrating laws and restrictions to governmental oversight and enforcement of transparency in the space.
However, the listing of one of the world’s biggest crypto exchanges, Coinbase on the stock exchange in the US is a good indication that regulators are very receptive to the possibilities of crypto and may not make regulations to damage it.
The complaints about the volatility of crypto are finally catching up to unbelievers. According to the Chinese regulators, the volatility of the coins “seriously violate people’s asset safety and disrupt normal economic and financial order.”
While banning its use, the regulator warned consumers against wild speculation, adding that the “losses caused by investment transactions are borne by the consumers themselves.” This is because Chinese laws offer no protection to them.
However, plunges are not new to Bitcoin. In its long history, the coin has weathered worse. While the direction as at time of writing still points downwards, there is a likely possibility that it recovers. But the early forecast of hitting $100,000 by midyear now seems highly unlikely.
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