Bitcoin is experiencing losses after its worst weekly decline in almost a year and on the one hand its long-term outlook could be even worse due to environmental concerns and tightening regulations.
The enormous amount of energy required to mine Bitcoin and the prospect that the government will create more barriers for the largest cryptocurrency leads to tokens losing “a large part of their value over time,” said BCA Research Inc.
The fees and delays in Bitcoin transactions make it “unsuitable as a medium of exchange,” wrote BCA Head of Global Research Strategy Peter Berezin in a report released Friday. Additionally, funds that focus on environmental, social, and governance tend to avoid Bitcoin-linked companies due to the large energy consumption of miners on computer networks.
Bitcoin is still up more than five times over the past year, a divisive rally that pits believers in a new asset class against opponents seeing a speculative bubble. Among the most notable recent developments is the purchase of Tesla Inc. tokens. worth $ 1.5 billion. At the same time, co-founder of Microsoft Corp. Bill Gates and Secretary of the Exchequer Janet Yellen were among those who made a cautionary gesture.
Governments will create more barriers because they could lose billions of dollars in revenue from seigniorage – the difference between the face value of money and the cost of producing it – according to BCA.
“Many companies have adapted to Bitcoin to associate themselves with the mystical digital currency technology,” added BCA's Berezin. “When ESG funds start leaving Bitcoin, the price will start to fall. Get away. “
Bitcoin, the largest cryptocurrency, was up 2.5% to $ 46,359 as of 11:53 am in Hong Kong on Monday. That left a record high of $ 58,350 set just over a week ago.
JPMorgan Chase & Co strategists in a note on Friday said the launch of a Bitcoin exchange-traded fund for Purpose could hurt cryptocurrency prices as well. After the initial flow of “strong beginnings” had died down, strategists led by Nikolaos Panigirtzoglou wrote. The four-week flow rate to all Bitcoin funds was relatively weak against the December peak, they said.
The Grayscale Bitcoin Trust, the largest traded crypto fund, also remains one of the key prospects. The inflows into the trust “stopped”, and the cash going into other Bitcoin vehicles was not “strong enough to prevent an overall slowdown in the Bitcoin cash flow impulse,” the strategists wrote.
