Bitcoin prices fell below $6,500 this week following reports that Goldman Sachs Group, Inc. (NYSE: GS) is scrapping plans to roll out a cryptocurrency trading desk. However, some analysts say Goldman isn’t bitcoins biggest problem, and the currency is getting crushed under the weight of a strong U.S. dollar.
Business Insider reported on Wednesday that unnamed sources familiar with the matter say continued uncertainty involved in cryptocurrency regulation has made Goldman reconsider launching a bitcoin trading desk. The latest news comes after the U.S. Securities and Exchange Commission issued another round of rejections and delays on bitcoin exchange-traded fund applications earlier this year. Goldman’s potential backpedaling on cryptocurrency trading is another blow to the confidence of bitcoin bulls hoping for mainstream cryptocurrency adoption.
A sell-off on Thursday put bitcoin prices down 52.2 percent year-to-date, but eToro analyst Mati Greenspan says regulations, the SEC and Goldman Sachs are not the main reasons for bitcoin’s decline. Greenspan says the rally in the U.S. dollar has claimed plenty of victims in recent weeks, and bitcoin is one of them.
“My favorite explanation lately remains the strength of the U.S. dollar,” Greenspan says. “The USD has been the global reserve currency for decades now, so for as long as it is showing strength and bitcoin is perceived to be in a bear market, many people will likely be looking to the buck as a more stable store of value.”
In the past six months, the U.S. Dollar index, which tracks the value of the dollar versus a basket of international currencies, is up 5 percent. Analysts have been calling for an end to the dollar rally for months now, but it has remained resilient up to this point.
Nicholas Colas, co-founder of DataTrek Research, says the damage done to the cryptocurrency market in 2018 will likely take a long time to undo.
“We’ll keep watching our indicators, but for now the action looks more like a bottoming process than an actual low,” Colas says.
At this point, Colas says…
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