Bitcoin froze at $40,000 after roller coaster ride, with some institutions holding coins costing as low as $10,000

The average cost of holding a bitcoin in gray is only about $13,700

Bitcoin, which was once thought to be on the ropes, seems to have slowed down after several figures took the stage.

After nearly losing the $30,000 barrier and then stopping its decline at around 22:00 GMT on May 19, bitcoin rallied slightly from yesterday, from a 13% decline in the previous 24 hours to a 14% gain in 24 hours. As of 12:20 p.m. BST on May 21, the price of bitcoin stood at $40,651.56, up 2.39% in 24 hours compared to yesterday. It is back and holding near $40,000.

Bitcoin froze at ,000 after roller coaster ride, with some institutions holding coins costing as low as ,000

Bitcoin Price Intraday Change / Chart Source: Coinbase

It’s not just the markets that are dumbfounded in the face of this volatility; central banks are opening their eyes to cryptocurrencies like Bitcoin.

In its annual financial risk assessment, the Bank of Canada said on May 20 local time that the volatility of cryptocurrency assets is a new vulnerability facing the country’s financial system. Policymakers, led by Governor Mike Macklem (Tiff Macklem), said that while the crypto market is not yet systemically important as an asset class or payment method, that could change if a large technology company with a large user base decides to issue a cryptocurrency that is widely accepted as a means of payment.

Norway’s central bank (Noregs Bank) also warned that if banks continue to increase their investments in cryptocurrencies, the latter’s sharp price fluctuations could cause problems for the banking system.” We do not see these fluctuations as a major threat to financial stability, but if the exposure continues to increase, it could pose a threat.” Torbjorn Haegeland, executive director of the Financial Stability Unit, said.

Powell, who has been active in major venues recently, has meanwhile accelerated his rhetoric on a digital dollar, with plans to launch a public consultation on a “digital dollar” project. In a rare video statement released by the Fed on May 20, Powell highlighted the potential benefits and drawbacks associated with digital currencies and the growth of so-called stablecoins (private digital currencies pegged to the U.S. dollar), which he said could pose a threat to the financial system.

In most cases, verbal warnings have less impact than actual actions. Following the People’s Bank of China’s announcement that financial institutions should not provide any digital cryptocurrency services to their customers, including currency exchange, registration, trading, clearing and settlement, and the Biden administration’s proposed new proposal that cryptocurrency transfers over $10,000 must be reported to U.S. tax authorities, the price of bitcoin subsequently fell about 5%.

Putting aside the already reported multiple times of bitcoin’s sharp drop on central bank regulatory developments, the cost and situation of other institutional holdings such as Tesla has also piqued the curiosity of many.

According to Tesla’s earnings report, the fair market value of the company’s bitcoin holdings was $2.48 billion as of March 31, 2021, meaning the company is expected to make a profit of about $1 billion if it cashes in the digital currency, according to Matt Weller, global head of research at The Carlson Group. With the price of bitcoin at $59,000 on March 31, $1 billion of the $2.48 billion market value is a profit, suggesting that Tesla’s bitcoin position costs just under $25,000 per unit on average.

“In the first quarter of this year, Tesla generated $4.4 billion in profit, the highest quarterly profit in its history,” Matt Weller said, “of which the sale of bitcoin brought in $100 million in profit, the sale of cars instead lost more than $100 million, and the rest of the profit came from the sale of carbon credits. Some argue that since the sale was made, of course Musk didn’t need to sing Bitcoin’s praises. Subsequently, bitcoin continued to fall until last week when Tesla announced that it was suspending the acceptance of bitcoin as a means of payment for car purchases, bitcoin Waterloo, which once fell from a high of over $10,000, and the entire cryptocurrency market evaporated more than $300 billion in market value.”

“The cost of the gray fund is far from the price of the coin. Currently, Grayscale holds a position of 652,900 bitcoins at an estimated cost of $8.931 billion. In other words, the average cost of a bitcoin held by Grayscale is only about $13,700,000.

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