With Investors Backing Away From Crypto, Should You Buy Now?

Data analyzing in exchange stock market: the candle chars on display.
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It’s probably way too early to suggest that investors are getting bored with cryptocurrency after years of pouring their money into it. But recent data does point to a big slowdown in the number of investors buying Bitcoin and other cryptocurrencies.

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As CNBC reported on Monday, trading volumes at the largest crypto exchanges — including Coinbase, Kraken, Binance and Bitstamp — declined more than 40% in June, according to CryptoCompare, a provider of crypto market data.

The CryptoCompare report noted that Bitcoin’s price touched a monthly low of $28,908 in June and finished the month down 6%. The daily volume maximum of $138.2 billion achieved on June 22 was down 42.3% from the intra-month high in May.

China has played a major role in the slowdown, Reuters reported, citing a comment from CryptoCompare saying that “headwinds continued as China persisted with its crackdown on bitcoin mining … As a result of both lower prices and volatility, spot volumes decreased.”

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Chinese authorities have been cracking down on the crypto industry in recent months. At the end of June, China ordered a halt to cryptocurrency ahead of the launch of its own state-backed digital currency. That order effectively shut down mining operations that accounted for up to 60% of all of Bitcoin’s mining power, CNBC reported.

“The Chinese crackdown has caused a lot of fear, which is showing up in markets,” Teddy Vallee, chief investment officer at Pervalle Global, told CNBC. “The digital asset ecosystem got punched in the face, so it’s currently up against the ropes versus fighting in the middle of the ring. Typically when you have large sell-offs, participants are quite fearful and pull back their chips.”

Gabor Gurbacs, director of digital assets strategy at VanEck, told CNBC that volumes tend to slow down during the summer anyway. When you add in the recent drop in crypto prices, it’s hardly surprising that fewer investors are putting their money into it. Many people who invested their money when crypto was peaking earlier this year have suffered substantial losses.

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“Half the market is gone,” Gurbacs said. “We can’t expect the same volumes when the market is basically a lot of people who are new to the space who got spooked.”

The lower prices could push value investors into cryptocurrency, experts say, figuring that now is a good time scoop up coins at comparatively cheap prices.

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Meanwhile, it’s also worth noting that despite the recent slowdown, volumes are still higher this year than they were a year ago, and some experts predict volatility and volume to reach previous levels.

“We believe that with more institutions publicly announcing crypto trading and research divisions, sovereign nations adopting bitcoin as currency, and miners moving to more democratic nations, bitcoin is poised for growth instead of shrinking,” Nick Mancini, research analyst for crypto sentiment analytics platform Trade the Chain, told CNBC.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte MagazineStreet & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, will be published in 2021 by Atmosphere Press.

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