Dubai: Amazon clearly is not going to deliver Bitcoin prices a boost – at least not immediately. The e-tailing giant was quick to dismiss speculation that it would start accepting Bitcoin-based payments, which, if it did, would have speeded up the crypto asset’s chances of going mainstream.
While Amazon disappointed Bitcoin holders, they will keep on hoping that the crypto will still get a few thousands’ worth of price boost from someone, somewhere. Because right now, Bitcoin prices do need some support from the $37,000-$41,500 range they have been bound to for some time.
Two of the most influential Bitcoin enthusiasts are doing their part to help matters. Elon Musk of Tesla is back to being Bitcoin-positive, while Twitter’s Jack Dorsey keeps putting the word out in its favour.
So, what's next for Bitcoin?
Khurram Shroff of Toronto-based IBC Group and a major investor in Bitcoin and the other popular crypto Ethereum remains bullish. “The final week of July seems to have finally injected some enthusiasm into the crypto markets,” he said. “The BTCUSD has gone above the widely-watched 50-day moving average, and momentum is starting to pick up.
“This movement is reviving many dormant bulls, who are now coming out of the woods, after a period when we saw the market go into an eight-week consolidation phase.”
That eight-week phase Shroff is referring to is when Bitcoin’s retail investors – many of whom had come on board recently – found that life in the crypto lane comes with many a twist and turn. This time, it meant that prices dropped from their all-time high of $64,000 plus and ended up under $30,000. There were no warning signs about such a fall, just a stomach churning dip that shook investors.
Shroff says investors should try and get used to these sudden shifts. And not to let emotion dictate buy-or-sell decisions. “As Bitcoin continues to seek mass - in terms of universal adoption - such bouts of volatility will generate the same old frequently asked questions,” he said. “Our take on this is that we always ask clients to do their research, and assist them in following through on this.
“We ask them to see what problems Bitcoin is trying to solve, and which of their needs it best addresses. So, when it comes to an evolution in the market reaction to volatility, I would say it is a process.”
So, if $40,000 is the Bitcoin price at a particular moment, the seller will not get that particular price, but minus a certain percentage.
“The issue with Bitcoin is that what investors see on the screen is not what they get because of the wide ‘bid ask’ spreads, which sometimes exceed 10%, which is over and above the daily price fluctuations of 10-15% at times,” said Sameer Lakhani, Managing Director at Global Capital Partners.
“Tweets by celebrities roil the crypto markets, all of which leads one to conclude that it is not for the fainthearted. Nor has Bitcoin performed the role which it was designed to - that of a currency. Given its volatile nature, for most investors, it is best left alone until a regulatory framework is in place.”
Can investors shut out the noise?
It depends on when they got hooked on the asset. On January 1, 2021, Bitcoin was at $29,374 – that came after an eye-popping 200 per cent rise through 2020. At the start of the year, much of the talk was about how soon the $100,000 mark would be breached. This was also the time when quite a few retail investors decided they could not miss out on this opportunity.
Our launch in Dubai was very timely. We have had many investors invest through our Toronto listing. Our challenge is to get liquidity and volumes up in the region.
But in the world of crypto, nothing ever goes as per the script. One word from Musk about the high energy costs of mining new Bitcoins set off a price stutter.
Fred Pye, CEO and Chairman of 3iQ Corp. who recently listed the first Bitcoin fund in the Middle East on Nasdaq Dubai, counsels patience in dealing with Bitcoin at or around $40,000. “The [initial] 50 per cent retracement from the $64,000+ all-time high was perfectly normal,” he said. “There was a good two-month period where low $30,000 accumulations were possible [for investors wanting to buy Bitcoin at the dip].
“Our launch in Dubai [of the new fund] was very timely. We have had many investors invest through our Toronto listing. Our challenge is to get liquidity and volumes up in the region.
“This will come naturally as institutions and liquidity providers’ step up to the plate [on Bitcoin investments]. Our experience is regional investors are taking their first and initial positions.”
Buy or sell?
Institutional investors can afford to take the long position on any exposure they take in any asset. But can individuals afford to do so, unless they can call on adequate funds from their other ventures?
While it is true retail investors are often characterized by lack of knowledge and irrational behavior, the stock market is enormously more transparent, efficient and liquid than the cryptocurrency market.
This is what one recent Bitcoin investor, Eima, based in Dubai had to say: “Bitcoin’s stomach churning volatility has led me to throw in the towel despite its appeal as an investment. Small investors have been burnt and forced to sell right at the worst time.”
This is however the case with any investment, the only difference is that with Bitcoins those sentiments get magnified. According to Shroff, “It is natural for market participants to react whenever there is a dip. This can range from ‘keep calm’ from long-term investors to ‘take profits now’ from retail investors or speculators.
“As the market innovates further, we are bound to see period of accentuated moves on either side. Eventually, such reactions depend on the prevailing market psychology.”
Investors in the lurch
Roberto d'Ambrosio, CEO of the consultancy Axiory Global, is not convinced that whatever swings Bitcoin goes through price-wise is similar to those on the stock markets. “While it is true retail investors are often characterized by lack of knowledge and irrational behavior, the stock market is enormously more transparent, efficient and liquid than the cryptocurrency market.
“We also have to consider that cryptocurrencies are facing increasing [regulatory] aversion in many countries, in favor of national initiatives to a base currency on blockchain.”
This could indeed be the last summer of “freedom” for Blockchain – whether in the US, the EU, China or India, regulators are stepping into the crypto picture. New regulations will inevitably follow to bring all Blockchain and other crypto assets into transparent mode.
Will that make investing in crypto more transparent and less prone to violent price swings in future? Will Bitcoin trading become more predictable – and even boring?
For retail investors who came late to the Bitcoin party, anything that could see them recoup their monies would be a break.
Some like Raza, a Dubai-based Bitcoin holder, is quite sure he will stay on, regulations or not. “I have held on despite the roller-coaster because Bitcoin remains an attractive asset with long-term gains. It is the ‘new gold’ - and I feel it will double from here in short time as inflation starts to hit the economy.”