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Checking in on Bitcoin’s rollercoaster ride

Bitcoin, the most popular cryptocurrency in the world, jumped to a four-month high through April 2, briefly breaching $5,000 on the Bitstamp exchange. The 15% climb puts Bitcoin above its lowest selling price of $3,400 in December of 2018 but a far cry below its trading high of $19,783.06 in December of 2017.

The jump ended Bitcoin’s longest slump in its 10-year history, proving what a difference a few days can make. On March 19, the value of all cryptocurrencies outstanding was down 85% from peak and volumes on U.S. exchanges had been falling. The price that day was just below $4,000 (WSJ).

The Takeaway

The violent mood swings continue as electronic currency exchanges still lack mainstream institutional investors, a regulatory framework, and accurate reporting mechanisms. There is currently no legal or regulatory framework applicable to cryptocurrencies and manipulation in cryptocurrencies is a growing concern for regulators. The Securities and Exchange Commission cited that risk in rejecting several bitcoin-based exchange-traded funds last year.

Nearly 95% of all reported trading in bitcoin is artificially created by unregulated exchanges, a new study concludes, as reported by Paul Vigna for the WSJ. This raises “fresh doubts about the nascent market following a steep decline in prices over the past year.” Research by Bitwise Asset Management found that the actual market for bitcoin is far smaller than previously thought.

No one knows what an appropriate regulatory framework might be, but we’ll keep you posted on developments in this emerging marketplace.

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