The renewed selloff in major cryptocurrencies is showing no signs of abating, with bitcoin foreshadowing more losses on the back of a pickup in risk aversion and profit-taking rush after the stall of overall upward momentum combined with lofty valuations and Tesla CEO Elon Musk’ putting the spotlight on the environmental costs of crypto assets.
As of press time, Bitcoin (BTC) is changing virtual hands at US $48,100, Ether (ETH) at US $3,860, ripple (XRP) at US $1.33, Binance Coin (BNB) US $584, cardano (ADA) at US $2.17, Dogecoin (DOGE) at US $0.51, ChainLink (Link) at US $44, UniSwap (UNI) at US $39, Polkadot (DOT) at US $45 and Stellar (XML) at US $0.67.
Market noise and buzz around joke currencies and their surge have discouraged serious investors as they fear such speculations threaten the global institutionalisation of the serious technology and innovation and would prefer to sit back and wait.
We should also note “Sell in May and Go Away” – an old stock market adage backed by surprisingly robust historical data, especially in the Northern Hemisphere where market activity slows down due to upcoming summer and holidays. Historical data show that overall market returns in many countries during the June-October period are systematically negative or lower than the short-term interest rate. The effect has been strongly present and consistent in most developed markets . As a result, many experienced investors try to offload their holdings before the end of May to preempt the expected retreat.
From massive selloff volumes, it appears many traders and investors are locking in gains now before a potential selling spree , a repeat of what happened just a month ago.
The current capped upward traction due subdued buy orders indicates further market-wide losses shouldn’t be ruled out in the coming days.
The concern about bitcoin’s energy use is far from limited to Elon Musk as the operation of cryptocurrencies like bitcoin requires substantial computational power equivalent to some country’s national grid to process transactions and to maintain a transaction ledger.
The decentralised ledger means that there is no authority to verify the block of transactions with that job instead shared out among various people called miners who have to compete to solve costly mathematical puzzles as their proof of work. The high cost is meant to discourage malicious activity as it is a “trustless” network.
Some other crypto currencies called altcoins use different and less energy-intensive methods such as a proof-of-stake approach pioneered in 2013 by another cryptocurrency called Peercoin although such cryptos still require substantially higher power than a conventional centralised system such as a card payment or bank transfer which can efficiently validate transactions based on the uniqueness and first-come-first served manner.
Proof of stake comes with a downside of being a more complicated system to maintain and less secure than bitcoin’s…