Omicron, the factors of climate change weighing on the crypto market
|Bank of England|
By Lee Kyung-min
The cryptocurrency market is undergoing significant adjustments, rapidly weakening investor sentiment that has remained largely undeterred over the past few years due to the lack of regulation and cheap cash injected to deal with the COVID-19 pandemic. .
The future evolution of the digital financial investment vehicle will be determined by the burden of regulation, an equally critical factor for the performance of the asset, of which the capital gains tax has been deferred by one. year.
Some say it remains unclear whether Bitcoin, one of the leading cryptocurrencies, will be able to withstand the myriad of changes in macroeconomic market conditions unfavorable to investors, including the end of the Federal Reserve dropout. and subsequent rate hikes next year.
Others say that high price volatility could turn extreme at times, but that the overall uptrend will not be abruptly reversed, an assessment reflecting the continuing increase in the number of very risk-averse institutional investors, whose behavior is almost exclusively governed by the guarantee of profit.
The price of bitcoin peaked at over 79 million won ($ 67,000) in early November, but has since plunged to a low of just over 54 million won on December 17.
It’s part of a dramatic price swing over the past year, since it started at around 30 million won in January. It then hit a new high in just three months, before surpassing 70 million won in mid-March, followed by 80 million won in April.
The rise was prompted by the Nasdaq listing of Coinbase Global, an American cryptocurrency exchange, a cause for great optimism that the virtual asset will be fully integrated as part of a legitimate financial investment method. earlier than expected.
The possibility of Bitcoin’s price reaching 100 million won was raised later, as the inflation-hedged asset is relatively insulated from the sharp depreciation in value of the economy, where emergency funds good. pandemic-induced markets were accelerating concerns about declining asset values relative to monetary value.
But prices have fallen sharply this month and last, impacted by the emergence of the Omicron variant and the announcement by the US administration Biden that the capital gains tax rate will be raised to 39. , 6%, against 20% currently.
Criticism of the digital asset for its anti-green characteristics in the context of rapidly spreading environmental, social and corporate governance (ESG) dynamics also poses a downside risk.
The heavy energy consumed to mine the cryptocurrency, according to some market watchers and conservationists, will ultimately lead to lower prices for crypto assets, as dependence on heavy carbon electricity will grow. frowned upon.
“Cryptocurrency certainly has growth potential, but the risks and volatility are just as important,” an industry official said. “How the new financial investment adapts to the new environment will determine the price and volume of transactions. “