Bitcoin slides on environmental concerns but backers hope for a $100k high

Edgar Borja and Edwin Escobar check the parts of a K1 ATM prototype, which is designed for handling cash, card payments, Bitcoin and receiving remittances, in Santa Tecla, El Salvador June 25, 2021. REUTERS/Jose Cabezas
The amount of bitcoin held on exchanges like Coinbase and Binance, have dropped to lower than they were in November last year. Photo: Reuters (Jose Cabezas / reuters)

Major cryptocurrencies were down on Friday morning after a volatile week amid rising concerns over bitcoin's environmental impact.

Bitcoin (BTC-USD) was down 0.4%, still struggling to cross the $50,000 (£36,237) mark. It was trading at $47,900 at the time of writing. Many supporters on Twitter are hopeful it will hit $100,000 by the end of the year.

Ethereum (ETH-USD), the second biggest crypto by market cap, was down 2.6% to trade at $3,524.

Over the past month bitcoin had made a brief foray over $50,000 but this proved short-lived, with the crypto not quite getting the boost some may have expected after El Salvador officially started accepting it as legal tender last week.

The rollout was rocky, marred by tech difficulties and protests from concerned citizens.

Bitcoin was down on Friday morning. Chart: Yahoo Finance UK
Bitcoin was down on Friday morning. Chart: Yahoo Finance UK

However, since then, the situation has steadied. Reports suggest issues with the government’s Chivo digital wallet, necessary for transactions, are being resolved and more than half a million people are using the wallet.

But bitcoin is still not being able to gain momentum.

The amount of bitcoin held on exchanges like Coinbase (COIN) and Binance, have dropped to lower than they were in November last year and bitcoin exchange reserves reportedly hit new multi-year lows this week.

This comes as analysis by economists from the Dutch central bank and MIT shows that a single bitcoin transaction generates the same amount of electronic waste as throwing away two iPhones.

“We estimate that the whole bitcoin network currently cycles through 30.7 metric kilotons of equipment per year. This number is comparable to the amount of small IT and telecommunication equipment waste produced by a country like the Netherlands," according to the paper, published in the journal Resources, Conservation and Recycling.

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Bitcoin's price has also taken a hit this year with regulatory crackdown from many countries, including China and the UK.

Ray Dalio, the founder of Bridgewater Associates, went as far as to say regulators could try to get rid of bitcoin altogether, the Financial Times reported earlier in the week.

"I think at the end of the day if it’s really successful . . . [regulators] will try to kill it," he said at the Salt Conference, a gathering of hedge fund managers in New York City.

He also dismissed a forecast made by Ark Invest CEO Cathie Wood that the crypto's price would increase tenfold within five years to hit $500,000, stating this "doesn't make sense."

Wood had earlier said at the same conference: "If we are right and companies continue to diversify their cash into something like bitcoin, institutional investors start allocating 5% of their funds into … bitcoin, or other crypto, we believe that the price will be tenfold of where it is today, so instead of $45,000, [it would be] over $500,000."

Contrary to what Dalio said, Wood said “our working assumption from the beginning was that … no regulator wanted to be blamed for preventing the next big technology breakthrough to happen in the US.”

It has been reported that Ark Invest is creating a bitcoin exchange-traded fund.

On Friday, reported that the crypto's supporters "still believe a significant second-leg up will be happening this year" and cited a Twitter survey that showed 123,410 people believe bitcoin will reach $100,000 by the end of 2021.

Meanwhile earlier this week, a fake press release announced that litecoin (LTC-USD) and Walmart (WMT) had agreed to a partnership, which led to an 20% spike for Litecoin and a 5% gain for bitcoin.

Soon after, though, when the press release was discovered to be fake, the gains disappeared.

"This is a reminder of how big news can affect the crypto market, especially the less liquid coins," Sam Kopelman, UK country manager at cryptocurrency platform Luno, told Yahoo Finance UK.

"Since then, bitcoin has slowly recovered and rallied to creep back up and over $48k. That said, a high level of volatility around this mark indicates $50k is a key psychological level and many traders seem to be taking profits following the 7 September crash," which coincided with the El Salvador rollout.

On the plus side, business intelligence software company Microstrategy (MSTR) announced it had bought another 5,000 bitcoin, taking its total to 100,000.

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