Bitcoin and other popular cryptocurrencies seem to be rallying after a frightful start to the 2022 trading season, but not before we stood in horror watching the digital assets market sink to its lowest levels since last summer earlier this month.  The world’s most popular and heavily capitalised cryptocurrency, [Bitcoin](/coins/btc), sank well below the “psychological” $40,000 _floor_ last week, to an anaemic value of $32,982.  Bitcoin recovered some of its footing this week, reaching a price of $36,000, as aggressive investors began to dip their toes back in the digital waters – that’s progress, but certainly well off the bellwether’s high of $69,000 last November.

2021 was arguably one of the most astonishing years for cryptocurrencies as the market finally broke through a ceiling of sorts and achieved a state of “mainstream adoption”.  Interest in digital assets soared as the first ever Bitcoin exchange-traded fund (ETF) was introduced on the New York Stock Exchange last fall (under the ticker “[BITO](https://www.proshares.com/our-etfs/strategic/bito)”), El-Salvador formally adopted Bitcoin as legal tender, and interest in Non-Fungible Tokens (NFTs) reached a fever pitch after the artist known as Beeple, sold his NFT artwork, called “Everydays: The First 5000 Days,” last Spring for a mind-numbing $69 million.

All this interest and hoopla over cryptocurrencies sent the value of the digital assets market past the $2 trillion mark.

We get it.  After all the euphoria we experienced during cryptocurrency’s 2021 trading season, and the subsequent market crash that has erased the last 6 months of progress, the thought of having to report the profits from those crypto-purchases last year to a governmental authority probably sounds terribly unappealing.  Take heed.  If you’ve experienced any thoughts or are considering concealing profits that you’ve made from any cryptocurrency trades from the tax man, it wouldn’t be a prudent course-of-action. 

Am I being paranoid?  Hardly.  The IRS in America has been perfectly clear in the fact that they are watching cryptocurrency as closely as they ever have.  This will become all too evident when you look at page one of your tax returns this year.  On it, there is likely to be a _yes_ or _no_ option at the top of the first page asking about your ownership of _any_ “virtual currency.”

After the year cryptocurrencies had in 2021, and the 5000% gains experienced by some assets, trust us, the tax professionals are hardly _the least_ informed on what’s happening in the digital assets market.  So, don’t try feigning ignorance.  Claiming that “you didn’t know” isn’t an option for 2021, or beyond.

Being willfully dishonest on a government document can subject you to penalties that include perjury.  That’s a bad way to start 2022.  In the last analysis, any _selling_ and _buying_ of any type of digital assets that took place in 2021 _is expected_ to be reported.  If the extent of your trading was buying and simply holding, you likely won’t owe a thing…yet.

The time to ask questions of your tax professional is before you file, not after.

Cryptocurrency Mainstream Adoption Rises

A sense of optimism hung in the crypto air this morning as [Bitcoin](/coins/btc) and other major cryptocurrencies bounced strongly after a week of heavy losses.

At the time of writing, the price of Bitcoin stood at $36,460 representing an increase of 8.10% in the last 24 hours while Ethereum gained 8.23% reaching a price of $2,423. The total market cap of crypto currently stands at $1.65 trillion, an increase of 7.71%. After a week of absolute carnage, it appears that investors have indeed bought the dip demonstrating continued strength in the cryptocurrency market.

## Increasing correlation to traditional markets

Bitcoin began its bounce on Monday as US east coast traders returned to their desks after lunch. Interestingly the US equity market also saw a strong surge during the same time indicating Bitcoin’s increased correlation with traditional markets. With many eyes on today’s meeting of the Federal Reserve Open Market Committee (FOMC) which is anticipated to discuss interest rate rises and continued asset purchases, this week could be very interesting indeed.

The Relative Strength Index continues to indicate Bitcoin is heavily oversold which would suggest a turnaround is imminent as buyers seek to take advantage of the discounted prices. As we have mentioned before, historically Bitcoin often begins strong rallies after precipitous falls. Could this be the start of a rally to new all-time highs?

## Alt season on hold?

Mike McGlone, Chief Commodity Strategist at Bloomberg Intelligence however was not so optimistic for altcoins going on record to say, “Price reversion in crypto is likely to spread in 2022 after the assets were a poster child of speculative inflationary excess in 2021, but Bitcoin stands to come out ahead.”

However, as we can see above many of the major altcoins demonstrated as much resilience in Bitcoin with equally strong bounces. Solana, Polkadot, Atom, and Avalanche all posted 24-hour gains ranging between 12% and 17% respectively. The crypto market may be down, but it is certainly not out.

## ‘I'm loving it’

Finally, in a candidate for tweet of the year already the official Twitter account of McDonald’s Restaurants asked “[how are you doing people who run crypto twitter accounts?](https://twitter.com/McDonalds/status/1485726032967704582)” Demonstrating the humour and camaraderie that has come to be associated with what is known as ‘crypto Twitter’ McDonald’s are clearly getting their own back on all those crypto tweeters who see a job at McDonald’s as the last resort in a prolonged bear market. However, I and many others have a feeling that McDonald’s will soon be eating their own words, with extra fries.

Bitcoin and Crypto Rebound After Week of Loss

[Bitcoin](/news/category/bitcoin-news) traders woke to yet more shock Monday morning as the price of the asset tumbled to further localised lows.

At time of press, the price of the world’s number one digital asset sat at $33,728 – a fall of 5.52% in the last 24 hours. However, with the price of Bitcoin bottoming at $33,243 at 11:09 UTC this morning the current price shows that there are buyers at this level but as you may well imagine traders and investors are treading with extreme caution. 

Bitcoin wasn’t the only crypto to experience a devastating fall in value. The entire market also dropped sharply and currently stands at $1.54 trillion representing a fall of 7.01% in the last 24 hours.

## Outside factors

With market and network fundamentals at their strongest in years many investors are looking for outside factors as the reason behind the latest market crash. Tensions between Russia and NATO led allies continue to simmer over a Russian military build up at the Ukrainian border and while Russia insists it has no plans to invade, the USA and the UK have already told their embassy staff to begin making plans to leave the country. In contrast, the EU have no plans to fly diplomats out of Ukraine and is at a loss to explain why the USA and UK have given the green light adding ‘the US has not given any clear justification for its decision’.

As we reported on Friday, cryptocurrency and digital assets are still seen by many as risk-on investments which in times of uncertainty are often the first to be sacrificed, regardless of market strength.

However, there are other angles at play in this situation which many in the crypto community believe are having an impact on market activity. The US have threatened Russia with economic sanctions which will ‘bring the country to its knees’ should the country decide to stage an invasion of Ukraine. In practical terms this means deactivating Russia from the SWIFT network which has been used by every nation state to transfer capital around the world since 1972.

## ‘Alternative rails of finance’

In retaliation to the threat from Joe Biden, Russia have spoken of using ‘alternative rails of finance’ which many people believe is a nod toward distributed and decentralised networks able to move large amounts of capital such as Ripplenet or Stellar Lumens. However, with both of these firms originating in the US it is hard to believe Russia would choose to adopt their services. That being said the nature of many cryptocurrency networks is borderless and the vision they hold for the future is one of harmonious trade with drastically reduced friction in terms of policy, regulation and cost.

The last thing the world needs right now is yet another conflict and personally speaking I don’t think that is going to happen. I do believe however that a movement away from out of date and weighted legacy payment systems such as SWIFT towards the large scale use of decentralised and distributed networks that enable a fairer and balanced global economic environment is only a matter of time. However what time frame this financial transformation occurs on is anybody's guess.


Crypto Price Down as Ukraine Crisis Hits

The price of [Bitcoin](/news/category/bitcoin-news) suffered further crash losses today as the value of the world’s foremost digital currency dropped below $40,000 usd for the first time in six months. While recovering slightly since a precipitous fall to $38,250 in the early hours of this morning, the price of Bitcoin is currently trading at $39,022 usd leaving many investors to speculate what caused the drop.

The Bitcoin network has never been stronger with the hash rate at all time highs. The hash rate is the metric which illustrates the computing power needed to mine Bitcoin. A higher hash rate demonstrates confidence in the network and its long term growth. After dipping in mid 2021 the hash rate has recently rebounded to record highs.

## External influences

It is often said that positive price action usually follows higher hash rates however looking at the current market performance this is clearly not the case. As we know the cost of mining is closely tied to the price of Bitcoin. For large scale mining farms to be profitable miners need to know their break even point and calculations based on the current hash rate indicate this to be around $34,000 usd.

With the network in good health it is pertinent to look for outside factors which may have caused investors to sell off.

## $600 million ways to fry

Many people are pointing towards Friday’s options expiry of some $600 million in open interest contracts as a major factor in the price crash of Bitcoin. After almost two weeks of sideways action many investors believed that $40,000 usd represented a solid price floor. However, with speculators gambling on the value of Bitcoin through futures based ETF’s the price of an unregulated asset such as Bitcoin is always going to be open to manipulation. When you add in the fact that leveraged Bitcoin liquidations across trading platforms account for $292 million the picture of market manipulation becomes clear. Regulation has never been more needed in an industry desperate to break into the mainstream.

## Ukraine crisis

History shows us investors do not like uncertainty and when anxiety is in the air capital is often pulled from high risk assets into safe havens. Although Bitcoin is more frequently viewed as a risk free hedge to rising rates of inflation it is still considered by many to be a risk-on investment. Therefore, with the crisis in Ukraine bringing increased uncertainty to worldwide markets it is prudent to believe that a degree of long term profit is banked as significant capital leaves the market. The difficult question any serious investor should be asking right now is what and  how long will it take before Bitcoin inevitably bounces back?


Bitcoin below $40,000 for first time in 6 months

[Bitcoin](/news/category/bitcoin-news) price action remains stable but is a value surge just around the corner?

The price of Bitcoin has been steadily declining since 8th November leaving many to speculate the bull run is finally over. With a retracement close to 40% it is easy to see why this is a popular narrative. However, there are many people who believe Bitcoin has one and possibly two more bull runs left in the tank. What are the factors behind this optimism and when could this occur?

## Price volatility at record low

The current price of Bitcoin stands at $41,876 representing a fall of 2% in the last 24 hours. Bitcoin has been range bound between roughly $41,000 and $43,000 since 6th January which in the volatile land of unregulated cryptocurrency is something of a rarity. Clearly retail investors have been spooked and institutional investors are buying their time.

This price stability is reflected in the volatility, which according to the Bitcoin Volatility Index is at its lowest point since November 2021 at 2.63%. Low volatility might not be attractive to traders but from an institutional adoption angle it represents maturity and stability which in turn generates interest. Therefore the ‘boring’ price action of Bitcoin may be just what is needed to encourage more large-scale investors to the crypto table.

## Bitcoin fear and greed index

As mentioned above, the price of Bitcoin has seen a sharp pull back from record highs of November 2021. In turn, retail investment has practically disappeared as many people fear getting burnt or worse. This market sentiment is measured by the handy Fear and Greed Index which uses a handful of factors to assess how traders are likely to react given the current price. The current Fear & Greed Index score is 24% representing Extreme Fear which to the bold investor is the perfect time to buy.

## China Bitcoin ban

Many people believe the price decline of Bitcoin since November 2021 could be related to yet another Chinese Bitcoin mining and trading ban as investors in the far east sell off and take profits. This would explain the 40% drawback as a large proportion of Bitcoin mining occurred in China before the ban. The USA now accounts for the highest percentage of hashpower in the world.

Historically speaking, Bitcoin has a habit of launching a price surge just when everyone thinks the asset is dead and it is headed for zero. This could easily be the case here. The development of the Bitcoin network has come too far in the last 24 months for it to crash and burn and the adoption of nation states such as Venezuela, El Salvador and lately Tonga show just how much credibility Bitcoin still has in the tank.

## Cleaning Up Cryptocurrency

The real question is why isn't anyone buying Bitcoin, and other crypto for that matter, in large enough quantities to move the market which was evident at time throughout 2021. This could be due to many factors. As we have discussed before the market is in dire need of regulation and its absence deters many traditional investors looking to enter the space. 

Later this week US Congress is due to host a hearing of the Oversight and Investigations Subcommittee entitles “Cleaning Up Cryptocurrency: The energy impacts of blockchain” which is sure to make recommendations which will impact the development of the market. So, is circa $40,000 the new floor? Will it hold? And once we have regulatory clarity will investors return to the table in record numbers? Only time will tell.



Is the Bitcoin price stagnant or stable?

The largest city in Brazil is planning to invest 1% of the city’s financial reserves into [Bitcoin](/coins/btc) it was revealed yesterday.

In an attempt to rebrand the city as ‘Crypto Rio’ mayor of Rio de Janiero, Eduardo Paes, recently announced that “We are going to launch Crypto Rio and invest 1% of the treasury in cryptocurrency – the government has a role to play”.

## Property Tax Discount

The announcement came during Rio Innovation Week and was released through news agency O Globo. The revelation came as Mr Paes discussed Rio’s cryptocurrency future as he shared a stage with the mayor of Miami, Francis Suarez. The discussion also included plans to consider a 10% discount on all property tax which is paid in Bitcoin. Rio de Janeiro city Finance Secretary Pedro Paulo commented “Let us study the legal framework to do this”.

In a move that closely follows neighbours El Salvador, the Brazillian government is clearly warming to the idea of integrating cryptocurrency payments. In November last year Federal Deputy Luizão Goulart proposed a bill to legalise crypto as a payment method for both public and private sector workers in the country.

The following month leading crypto payment firm in Brazil, MercadoPago, enabled all Brazilian residents access to buy, sell and hold all major cryptocurrencies such as Bitcoin and Ethereum. Clearly Brazil is waking up to the economic advantages of adopting a digital framework throughout their economy.

## Inflation hedge

With inflation around the world continuing to rise, cryptocurrencies represent some of the best ways to reduce costs and increase network security and efficiency. In addition many people see Bitcoin itself as an alternative to gold and the perfect hedge against the weakening of fiat currencies.

The price of Bitcoin remains in the low $40,000’s with the price at time of press standing at $42,359 a fall of 3.72% in the last 24 hours. The overall market cap sits at $2.02 trillion, a pull back of 3.16%. Bitcoin market dominance is 39.7% which shows it is still the worlds best known and largest cryptocurrency by market cap. How long this remains the case is anyone’s guess however with major cities like Rio de Janeiro announcing their intention to invest in Bitcoin, the message to undecided or cautious investors is clear. [Buy Bitcoin](/trade).


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