Cryptocurrency costs are beginning off the week on a weak observe Monday. Here is how just a few of the perfect identified names within the trade are faring as of 9:45 a.m. EDT:
- Bitcoin (CRYPTO:BTC) is down 1.7% over the past 24 hours, in line with information from Coindesk.
- XRP (CRYPTO:XRP), the token carefully related to Ripple, is doing a bit worse — down 2.6%.
- Dogecoin (CRYPTO:DOGE) slid 2.9%.
However on the brilliant facet, Ethereum (CRYPTO:ETH) is off solely 0.9%.
So what’s miserable cryptocurrency traders at present? It is perhaps a scarcity of leverage.
One of many lead articles on prime cryptocurrency web site Coindesk this morning is an opinion piece warning of “decrease systemwide leverage” as cryptocurrency exchanges FTX and Binance limit merchants to twenty instances leverage on their trades — that means when shopping for crypto, they need to now pay 5% upfront on a purchase order, as an alternative of 1% beforehand.
Though one different trade, BitMEX (which nonetheless permits 100 instances leverage), advised Coindesk that 100 instances leverage is “very uncommon” in its market, and most frequently a method utilized by merchants who’ve the least cash obtainable to maneuver markets, i.e., particular person buyers. In concept no less than, limiting the leverage with which merchants can commerce ought to decrease buying and selling volumes to some extent — and this has Coindesk considering value swings within the cryptocurrency market ought to change into “a contact tamer” going ahead.
After all, the taming of the markets ought to work each methods — it ought to lower the frequency and extremity with which cryptocurrency costs rise (dangerous for buyers) but additionally the frequency and extremity with which cryptocurrency costs fall (good for buyers).
However why would this even-handed impact outcome within the costs of Bitcoin, XRP, and Dogecoin simply falling at present? For the reply to that query, you are going to wish to ask John Paulson, the hedge fund dealer who rose to fame in 2008 for his prescient shorting of the housing bubble.
In an interview with Bloomberg over the weekend, Paulson touted the benefits of investing in gold, and contrasted them to the dangers of investing in cryptocurrency, which he warned “are a bubble” and “a restricted provide of nothing.” Cryptocurrencies like Bitcoin and its ilk, explains Paulson, can go up as a result of there’s a restricted provide of them which you could purchase. However there’s merely “no intrinsic worth to any of the cryptocurrencies,” and for that purpose, he expects crypto — all cryptocurrencies — “will go to zero” finally.
A prediction like that one, from an investor with Paulson’s repute, is presumably the rationale cryptocurrency costs are happening at present.
This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all assume critically about investing and make choices that assist us change into smarter, happier, and richer.