Hello and welcome to this week's edition of Overbit news. Our first story relates to a change in trading volume. Trading volumes at the largest exchanges, including Coinbase, Kraken, Binance and Bitstamp, fell more than 40% in June, according to data from crypto market data provider CryptoCompare, which cited lower prices and lowered volatility as the reason for the drop.
On June 22, the daily volume maximum of $138.2 billion was down 42.3 per cent from the intra-month high in May. According to Reuters, the report, which was published earlier Monday, identified China as a crucial catalyst. In June, the price of Bitcoin fell to a monthly low of $28,908 and finished the month down 6%.
According to Ben Forman, managing partner at alternative investment firm ParaFi Capital, the emerging ESG (environmental, social, and governance factors) narrative surrounding Bitcoin's proof-of-work consensus mechanism, as well as negative regulatory undertones from the Financial Action TaskForce, the intergovernmental anti-money laundering watchdog, have dragged the mood down even further in the markets.
When these tales began to circulate in the market in May, sentiment plunged to single-digit levels on a scale of "1 to 150," said Nick Mancini, research analyst for crypto sentiment analytics platform Trade the Chain.
"Half the market is gone, 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." Despite the considerable decline in trading volume, it is still significantly greater than last year, according to Clara Medalie, research lead at cryptocurrency market data provider Kaiko.
"Volumes fell on almost every exchange in June, but overall volumes are still magnitudes higher than they were a year ago today," Medalie told CNBC.
Closing out today's edition of Overbit News is quite the headline from JPMorgan's analysis desk.
According to reports, JPMorgan analysts are now warning over El Salvador's plan to adopt Bitcoin as a legal currency, pointing to Bitcoin's low trading volume and extreme volatility.
Bitcoin proponents, led by Bukele, claim El Salvador's formal adoption of Bitcoin will cut the cost of remittances and boost financial inclusion among the country's unbanked. On top of that, there's a vast potential for a boon to industries in countries like El Salvador, already demonstrated by their proof-of-concept for Bitcoin mining with 'volcano mining'.
However, JPMorgan, one of the world's largest banking institutions, one that also correctly called the crash in May, does not see the situation as rosy.
JPMorgan researchers see Bitcoin's high volatility as the first and foremost challenge.
In addition, analysts warn that high demand for Bitcoin to U.S.dollar conversions on the government's Bitcoin spending platform could "Cannibalise onshore dollar liquidity."
It's no surprise Bitcoin has swung wildly through 2021, falling 50% after going up more than 20x in a year. While this has undoubtedly been a feature of Bitcoin for all of its existence, many proponents have said the volatility would stabilise as the price continues to grow higher, and it takes more money to move the market.
This is undoubtedly a long-term vision for Bitcoin, but El Salvador's launch of Bitcoin as an official currency in September will undoubtedly be the first most significant stress test on the network and its price mechanics.
Thanks as always for reading.