During the August Rally, the price of Bitcoin stalled at $50,000. Last week, the cryptocurrency settled around $48,279.42 and briefly crossed $50,000. Known for its volatility, bitcoin has doubled from January. It fell 52% from April to June and then bounced 65% from July to August. But, it still remains under $50,000 and here is why:
1. DeFi is growing exponentially
Last year, the sector of decentralized finance (DeFi) experienced unmatched trading volume. Thousands of cryptocurrency users locked their assets away in DeFi protocols for generating high-interest yields. To participate in this, many investors converted their bitcoin holdings to a smart contract-supported token like ether.
2. Increased popularity of NFT
Apart from DeFi, the NFT market is stealing away the spotlight from bitcoin. The amount spent on purchasing NFTs has increased from $10 million at the start of 2021 to $2.6 Billion in the mid of September. Because of the ascendancy of NFT, the dominance of bitcoin has significantly dropped.
3. Pressure by the US regulators
The contentious infrastructure bill was recently passed by the US Senate. As per this bill, a budget of $1.2 trillion will be used for improving the different areas of the economy. This proposal also included changing the cryptocurrency taxation rules, which now require the crypto brokers to report their transactions. The regulatory tussles between the crypto lending companies and state securities regulators haven’t done any good for Bitcoin.
4. The rise of dollar
The rise of the dollar and the recovery of the economy means that people will be less interested in economic hedge assets such as bitcoin. The drop in the inflation rate has also been responsible for the stall in the bitcoin market.
5. Bitcoin ban in China
The People’s Bank of China has banned all crypto-to-crypto and crypto-to-fiat transactions. All activities related to crypto trading have been prohibited. When this announcement was made, the price of Bitcoin fell by about 10%