Bitcoin, currently trading at $ 37,866 (£ 27,259), hit levels of $ 41,330 on June 15, a key resistance area of $ 41,250, but has continued to decline since then.
It came when “big short” investor Michael Burry warned that the “mother of all crashes” was imminent and predicted a downturn in crypto and meme stocks.
“All hype / speculation attracts the retail trade before the mother of all crashes comes,” said the investor tweeted. “If crypto falls trillions or meme stocks fall tens of billions, #MainStreet’s losses will approach the size of countries.”
He added that people’s fear of missing out (FOMO) has driven asset prices to unsustainable levels.
This week, the cryptocurrency market was rocked by an announcement by the US Federal Reserve that it could hike rates through the end of 2023. Assets classified as risky, such as certain stocks and crypto, have also been weighed down by ongoing concerns that the Fed may wind up its bond purchase program earlier than expected.
On Thursday, the World Bank also rejected a request from El Salvador to help introduce Bitcoin as legal tender.
The bank said it could not support El Salvador’s plans due to the environmental impact of bitcoin mining and transparency drawbacks.
It came when the UK’s Financial Conduct Authority (FCA) reiterated its warning that people “should be ready to lose all their money” when investing in cryptocurrencies.
The regulator estimates that 2.3 million adults in the UK now own crypto assets, up from 1.9 million last year, with more and more people viewing them as either a complement or an alternative to mainstream investments.
Enthusiasm for crypto assets is also growing. More than half of crypto users said they have had positive experiences so far and are likely to buy more, from 41% to 53%, according to the FCA. Fewer people also regret buying cryptocurrencies, from 15% to 11%.
Sheldon Mills, FCA’s Executive Director, Consumer and Competition, said, “The market has continued to grow and some investors have benefited from rising prices.
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“However, it is important that customers understand that if something goes wrong, they will likely not have access to the FSCS or the Financial Ombudsman Service as these products are largely unregulated.
Cryptos have recently been empowered with institutional support. Several organizations including MicroStrategy (MSTR), have billions of dollars in cryptocurrencies and traditional finance companies like PayPal (PYPL) and Goldman Sachs (GS) began managing the asset on behalf of clients.
“While things may seem calm to the inexperienced, behind the scenes activity is still strong,” said Paolo Ardoino, CTO at Bitfinex. “Options markets are buzzing while institutions test strategies.”
He added, “Bitcoin has become an integral part of some of the most diverse portfolios around the world. Long-term private investors ride the wave. The builders of Bitcoin keep building. The first Bitcoin upgrade in four years has been approved and will take effect in November. The developers are working in anticipation of the upgrade. The community continues to improve the global financial networks. “
However, according to a survey by Bank of America, 81% of fund managers say Bitcoin is still a bubble.
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