Bitcoin experienced a rollercoaster ride last week, recovering sharply on April 18 but giving back all the gains on April 19. This latest sell-off may have been triggered by high inflation figures in the United Kingdom and regulatory uncertainty in the United States. However, profit booking was not limited to Bitcoin, as most major altcoins also turned lower.
In the United Kingdom, the Consumer Price Index (CPI) rose to 0.7% in March, up from 0.4% in February, and above the Bank of England’s target of 2%. This increase in inflation is largely due to rising oil prices and the reopening of the economy after the COVID-19 lockdown. However, this news may have spooked investors and caused them to sell off their cryptocurrency holdings.
Meanwhile, in the United States, there is growing regulatory uncertainty around cryptocurrencies. The US Treasury Department is reportedly planning to introduce new regulations that would require cryptocurrency exchanges to collect more information about their customers. This move is seen as an attempt to crack down on money laundering and other illegal activities that may be facilitated by cryptocurrencies.
In addition, the US Securities and Exchange Commission (SEC) is still considering whether to approve a Bitcoin exchange-traded fund (ETF). The SEC has rejected numerous Bitcoin ETF proposals in the past, citing concerns about market manipulation and investor protection. The uncertainty around the regulatory environment in the US may have also contributed to the recent sell-off.
Despite the recent volatility, some analysts remain bullish on Bitcoin and other cryptocurrencies. They argue that the long-term fundamentals of the market are still strong, and that the recent sell-off may simply be a healthy correction after a period of rapid growth.
One factor that may support this view is the growing institutional adoption of Bitcoin. Major corporations such as Tesla, Square, and MicroStrategy have all invested billions of dollars in Bitcoin, and more institutions are expected to follow suit. This institutional demand could help to stabilize the market and drive prices higher in the long run.
In addition, there are signs that retail investors are still interested in cryptocurrencies. The number of Bitcoin wallets holding at least 0.1 BTC (approximately $5,500 at current prices) recently reached an all-time high of over 3 million, according to Glassnode data. This suggests that there is still strong demand for Bitcoin among individual investors.
Overall, the recent sell-off in Bitcoin and other cryptocurrencies may be a cause for concern in the short term. However, it is important to keep in mind the long-term fundamentals of the market and the growing institutional adoption of cryptocurrencies. As always, investors should do their own research and consult with a financial advisor before making any investment decisions.