After the wild first half of Bitcoin, these are the five biggest risks in the future

Bitcoin It got off to a good start until 2021 and reached a record close to $ 65,000 in April. But digital coins closed the first half of the year, down about 47% from that record — and the number of looming risks could be even more painful in the future.

While the supporters seem to be holding Bitcoin For now, other investors are wary of the intense volatility of the market and what that means for their portfolio. With that in mind, here are five of the biggest risks cryptocurrencies face as we enter the second half of this year.

China has been in the last few weeks Crack down on the cryptocurrency industryStops energy-intensive cryptocurrency mining operations and orders payment companies like major banks and Alipay not to trade with cryptocurrency companies.

Global crypto crackdown last week Spread to the UK, Regulators have banned major cryptocurrency exchange Binance from conducting regulated activities.

Simon Yu, co-founder and CEO of crypto cashback startup StormX, told CNBC that China’s move should be seen as “positive” for Bitcoin and other cryptocurrencies. ether That is because it leads to more decentralization. However, he added that cryptographic “over-regulation” in the United States can be a problem.

“As a country, the United States has too many departments to regulate it from different angles-is cryptography a security, a commodity, or a property?” Yu said. “Currently, the United States does not understand how to properly regulate the industry. This often leads to difficult decisions to operate cryptocurrencies.”

US Treasury Secretary Janet Yellen and other officials have recently warned about the use of cryptocurrencies for illegal trade.

Last year, former President Donald Trump’s administration proposed anti-money laundering rules that require people with cryptography in their private digital wallets to be identified if they make transactions of $ 3,000 or more.

“We have long warned that changes in investor sentiment and regulatory crackdowns could pop the crypto market like a bubble.” UBS Written in a memo this week.

Bitcoin recovered to a record high of about $ 64,829 in April of this year on the day of crypto exchange. Coinbase A big hit debut.then Fall to $ 28,911 In June, it temporarily fell below $ 30,000 and turned negative this year. Since then, it has exceeded $ 34,000.

Bitcoin bulls see it as a kind of “digital gold.” This is an asset that is uncorrelated with the wider markers, which can bring significant benefits in times of economic turmoil. But while volatility may be good when the price of an asset is rising, it goes bidirectionally.

If you buy Bitcoin in January and cash out in April, your money will double, but today these year-to-date revenues are 18%.Still, it outperforms performance S & P 500 The index has risen 16% since the beginning of the year. And in the last 12 months, the price of Bitcoin has more than tripled.

“A limited, highly inelastic supply in a single crypto can exacerbate volatility,” says UBS. “Limited real-world use and unusual price fluctuations also indicate that many buyers are looking for speculative profits.”

On the other hand, the tendency of traders to bet on high leverage on Bitcoin’s outflow from the market is Severe price fluctuations this year.

While ongoing volatility can put off some investors, Ross Middleton, chief financial officer of the decentralized financial platform DeversiFi, said that volatility itself does not prevent institutional hiring. Said.

Volatility says, “The potential for large price fluctuations means that the fund can make a big profit with a relatively small allocation compared to the size of the entire portfolio, so it is actually a big draw. It could be, “he told CNBC.

“The longer Bitcoin moves sideways in the $ 30,000 to $ 40,000 range, the greater the perceived” foundation “, and new capital is both assets and the wider crypto market,” Middleton said. It will flow into the market sooner. “

Mask’s electric car company surprised both Bitcoin fans and skeptics this year Buy $ 1.5 billion worth Of digital currency Accept as a payment method..But he then made a fuss about the crypto market after making a decision How to stop Bitcoin payments Due to the currency’s “insane” energy use and reliance on fossil fuels.

It raises some questions for asset managers who are under intense pressure to limit their investment in ethically conscious assets.

“At least some investors may be discouraged from holding Bitcoin,” analysts said. City He added that it could “accelerate government intervention to ban mining, as seen in parts of China,” in a research note earlier this year.

We are also facing so-called stable coins, whose prices are intended to be fixed to real-world assets such as the US dollar. Increased scrutiny..

Last week, Federal Reserve Bank of Boston President Eric Rosengren Said Tether, one of the world’s largest digital currencies, was a risk to the stability of the financial system.

Tether claims that each of its tokens is backed 1: 1 by the US dollar held in reserve, which is the idea of ​​keeping prices stable.Cryptocurrencies often use tethers to buy cryptocurrencies instead of greenbacks, but some investors are worried about tether issuers Not enough dollars ready Justify that dollar peg.

May, the company behind Tether Disassembled stable coin reserve, Revealed that about 76% were backed by cash and cash equivalents, of which just under 4% were real cash and about 65% were commercial paper, a type of short-term debt.

Tether has been compared to traditional money market funds, No regulation — And about $ 60 billion worth of tokens are in circulation, and the deposit amount is Many US banks..

There is Has been a concern for a long time Whether tethers are used Manipulate Bitcoin prices,When One study The token claims to have been used to support Bitcoin during a major price drop at the 2017 Monster Rally.

“Tether is a big problem,” Professor Carol Alexander of the University of Sussex told CNBC. “”Regulators don’t seem to be able to stop them for now. “

“Traders need a tether to open and trade accounts, or other cryptocurrencies. However, most large traders are based in the United States, so tether is a natural choice.”

DogecoinCryptocurrencies, which began as a joke, surged earlier this year and hit a record high as the number of retail investors accumulated in digital assets in search of large profits increased.

At some point, Dogecoin Worth more than Ford And other major US companies, Support from celebrities like musk.. Since then, its value has fallen sharply.

Elsewhere in the crypto market, decentralized finance, or tokens called DeFi, titan Crashed to zero.. The owner was Mark Cuban, a self-made billionaire investor.

“Another concern is the number of scams that have occurred throughout the year,” said Yu of StormX. “With certain meme coins, we’ve seen a lot of pump and dump activity and we’ve seen individual investors get burned.”

“Whenever the retail industry burns out, the government intervenes, and as we’ve seen, when things are over-regulated to some extent. 2018 and ICO (Initial coin offering), can have a negative impact on the industry as a whole. “