Cryptocurrencies Hold Above Pre-Brexit Survey Prices

Bitcoin, Ethereum and a couple of other digital currencies held near the recent levels of pre-Brexit referendum before a difficult week marked by volatility.

Bitcoin was hovering below $6,100 Monday but came closer to $7,000. Ethereum bounced from the lows of the week to trade in the $600s. Other larger cryptocurrencies like XRP and Bitcoin Cash also fell more than 20 percent but regained ground.

Bitcoin rose as much as 1,150 percent in 2017 but plunged more than 70 percent this year.

Monday’s price gauges remained well below the $19,000 bitcoin briefly traded for earlier this year. But from Tuesday’s low of $1,500 in early June to Monday’s highs, it would be a nearly 400 percent jump.

The price of bitcoin is to some degree a psychological phenomenon, reflecting how digital currency fever appeals to individual investors who fear missing out on its future. Some institutions, though, have been slow to embrace digital currencies, at least initially.

For instance, European Central Bank governor Mario Draghi referred to the volatility in bitcoin at a press conference after the central bank’s governing council meeting in Sintra, Portugal last month. “There is obviously a lot of activity, but because of the variations it is difficult to say whether or not it is a legitimate form of money,” he said.

Most of the major investment banks have been cautious. JPMorgan Chase Chief Executive Jamie Dimon made the shock remarks that “Bitcoin is a fraud,” said in a March conference call.

But independent economist and finance professor Mark Hulbert said that JPMorgan Chase’s size might encourage it to open its wallets.

“At a bank with $2.2 trillion in assets, JPMorgan has already moved into almost every financial trade and investment in the world,” Hulbert wrote. “In so doing, it could be a fierce advocate of digital money. In theory at least, it has the financial power and reach to accelerate the spread of bitcoin.”

The steady price support was comforting to market watchers, but Russia’s central bank warned that cryptocurrencies have little-to-no practical use.

“We do not consider crypto-currencies as the most stable instruments with regard to their price and distribution fluctuations. They are speculative in nature,” Russian central bank governor Elvira Nabiullina said in a statement Friday. “The fact that so-called cryptocurrencies can be used as a financial mechanism cannot escape the possibility of their collapse.”

Hulbert said that the cryptocurrencies’ status as a speculative investment vehicle concerns some bankers as much as their long-term value.

“The central banks that control the currency can manage the ups and downs of the currency, but if prices and confidence become too fragile and slip away, in the ultimate mad dash to safety, they will be the ones that will fail,” he said.

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