The Only Pronounced Risk in Cryptos Remain in Regulatory Actions, Not in Their Fundamentals

Cryptos remain in extreme volatility mode, which is, however, anything but a pronounced indication of the sector’s “deep-rooted problems” as many skeptics point at downturn episodes. Let’s not forget, that cryptocurrencies relatively painlessly survived the most dramatic period in their entire history when China’s authorities banned crypto mining in May.

When Reddit and Clubhouse crypto traders groups began self-liquidating out of desperation while the remaining “analysts” claimed that Bitcoin had entered a permabear market – months earlier than expected, the price of Bitcoin exploded from $29,000 to $40,000 almost instantly, while demonstrating the epic short-squeeze for over $1 billion worth of short positions.

July was the month of sharp comebacks in most cryptocurrencies. Was it anticipated? Absolutely – solely based on the ongoing global inflation data. Did the Ill-fated forecasters know it would happen exactly in July? Hardly. One way or another, Bitcoin survived the short squeeze, upsetting the bears, who were vociferously predicting its further fall to $ 25,000. However, the negative sentiment in the cryptocurrency community still persists despite the fact that the total market capitalization of all digital currencies in circulation has grown from $1.4 trillion to $1.6 trillion in a matter of several days. The market reached its maximum in a monthly interval on July 31 at $1.6 trillion, but there is obviously more to come. The widespread interest in Bitcoin is backed by the growth of the number of Bitcoin wallets: from May 2020 to January 2021 (over nine months), the corresponding audience rose from 65 million to 100 million, but thereafter (in six months) its size increased from 100 million to 221 million.

Over the past month, Bitcoin grew by 20.64% – most of the top three cryptocurrencies by market capitalization. Meanwhile, Ethereum (ETH) jumped 12.36% over the same period, while Binance's native token, Binance coin (BNB), grew the least at 8.84%. Bitcoin and cryptocurrencies have seen a violent return to volatility over the last two weeks with the combined crypto market losing then gaining around $300 billion. According to Glassnode, the number of wallets with balances of 1,000 – 10,000 BTC is now recovering, although in general, those were the large stakeholders that bought out the dip, so no one really had any chance to see early turnaround predictive signs.

The hash rate saw a significant drop down to 2019 levels in the wake of the above-mentioned news of China banning cryptocurrencies mining. That is because the ban led to a mass exodus of miners out of China into such locations as Canada, United States, Kazakhstan, and other global jurisdictions with less hostile policies. Since January 2020, China’s share of the hash rate has dropped from 72.7% to 46.0%. Meanwhile, the United States’ share of the hash rate has increased from 3.4% to 16.8%.

Bitcoin supply currently is 18.77 million, or 89% of the 21 million caps. However, according to Glassnode, the actual number of coins available for trading is much lower due to increased hoarding by investors and permanent loss of mined BTC over the years. So, basically, all dashboard metrics indicate the blockchain mechanism’s proper functionality, and the only new risk of a pronounced correction is again hiding in hard-to-predict regulatory actions. So far, however, nothing indicates any new impending tranches of the aforementioned.