Bitcoin, Bears and Gold

Bitcoin on the Back Foot

News that the new Head of the Bank for International Settlements views Bitcoin as a threat to financial stability and a “Ponzi scheme,” saw the cryptocurrency tumble below the $6000 mark on Tuesday. Bitcoin has been struggling to fight back against ongoing negativity, with bears determined to attack prices at any given opportunity. Yesterday’s excruciating losses are just the latest in a series of downsides that have seen the cryptocurrency lose more than 50% since the start of the year.

Reports that US and UK banks are banning customers from buying digital currencies with credit cards has not helped matters. The announcement that China will bar access to foreign cryptocurrency exchanges has further compounded the issue, and the outlook for the world’s premier crypto remains bearish. Could we be seeing the currency move full circle, with December’s astronomical gains the last violent flicker of a flame destined to wane? Only time will tell.

Although the recent days have been though for the number one cryptocurrency, Bitcoin has managed to recover on Wednesday to trade at $8165, up +22.56%.

Are the Bears Here to Stay?

Bitcoin isn’t the only instrument feeling the pressure of the bears. Concerns that the central banks are raising interest rates faster than expected saw world shares come under intense selling pressure on Tuesday. This follows a two-day plunge that saw Wall Street chart its steepest one-day decline in more than six years on Monday. By end of trading on Tuesday, Asian markets were awash with red, while European markets lost 2%.

Commentators remain largely in agreement over the latest decline, with UK Treasury Secretary Steven Mnuchin labeling it a correction, while traders on the other side of the pond predict a market bottom. The theories behind this week’s decline are many and varied, ranging from higher interest rate expectations to a healthy correction, to an overextending bull run and profit taking. However, if stock markets continue to drop, investors could be forced to evaluate whether the current global selloff is something bigger than a correction.

Commodity Spotlight: Gold

The stock market decline was good news for Gold on Monday, with futures on the yellow metal jumping 0.6% as investors fled volatile equities. However, Tuesday was a different story, and Gold tumbled below the technical support level – even as world stocks took a beating. Gold is trading slightly lower on Wednesday at $1326, down -0.24%.

The current decline is thought result from a strengthening US Dollar and renewed expectations of higher US interest rates. The metal may yet venture lower if the Dollar continues to find ground.

This article was Written by Lukman Otunuga, a Research Analyst at FXTM. For more information, please visit: ForexTime