Bitcoin network breakdown seems imminent – reckons head of Bank for International Settlements


  • The General Manager of BIS Austin Carstens says Bitcoin could soon break due to attacks.
  • Central banks have been advised to take the responsibility of issuing digital currencies.
  • Stablecoins raise the issue of governance because one entity has control over its fiat backing.
  • Bitcoin price rebounds after testing $30,000 but still faces resistance at $32,000.

The head of the Bank of International Settlements (BIS), Agustin Carstens, has warned that Bitcoin is getting closer to the risk of total breakdown. He advised central banks around the world to take the responsibility of issuing digital currencies.

Bitcoin could suffer a major breakdown as it nears maximum supply

Carstens asked investors in the digital space to "be cognizant that Bitcoin may well break down altogether." In his opinion, the network's vulnerability to attacks increases as Bitcoin draws closer to its maximum supply of 21 million coins.

The General Manager of BIS, the central bank for global central banks, made the remarks in a Hoover Institution speech on January 27. Carstens has, however, for a long time criticized the pioneer cryptocurrency.

Bitcoin soared over 300% in 2020 and continues the rally in January to record highs around $42,000. At the moment, BTC is holding above $30,000 amid a push for recovery back to price levels beyond $40,000.

Stablecoins bring forth governance issues

Facebook is still working on launching its global digital currency, a stablecoin that will be backed by a basket of fiat currencies. Nonetheless, the BIS general manager says that such currencies are controlled by a private entity (which ensures proper asset backing) brings forward governance issues. Carstens added:

Sound money is central to our market economy, and it is central banks that are uniquely placed to provide this.

If digital currencies are needed, central banks should be the ones to issue them.

Central banks worldwide are either studying or testing digital currencies for use as a modern means of exchange. China is at the frontline, having begun testing in 2020 and planning major trials in its larger cities this year.

Gold has no utility – Warren Buffet

In spite of the comments regarding Bitcoin's possible breakdown, the asset has, like gold, been fronted as a store of value. Investors often use gold to hedge against volatility in financial stock markets. However, Warren Buffet, the CEO of Berkshire Hathaway and a renowned investor, says that gold has no utility.

It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.

Although Buffet says gold has no utility, he maintains that he will not touch Bitcoin as an investment asset.

Bitcoin bounces off critical support amid rising overhead pressure

The pioneer cryptocurrency has revisited the key area around $30,000. Recovery has also ensued, sending BTC above $31,000. However, immense selling pressure is anticipated at $32,000. Additionally, the 50 Simple Moving Average on the 4-hour chart will likely prevent significant action above $32,000, thus delaying recovery to the next formidable hurdle at $34,500.

BTC/USD 4-hour chart

BTC/USD 4-hour chart

On the downside, support at $30,000, if not $28,000, must continue to hold firmly to ensure that Bitcoin sustains the uptrend. Otherwise, if lost, prices may tumble to $25,000. Moreover, bearish calls in the market say that Bitcoin could revisit $20,000 before it recovers substantially.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News


Latest Crypto News & Analysis

Editors’ Picks

XRP price eyes deeper losses, as 200-DMA looks at risk

XRP price is licking its wounds so far this Saturday, having reached the lowest in three months at $0.7691 on Friday. XRP bears are set to breach the 200-DMA, with a test of May lows likely. Ripple confirmed a symmetrical triangle breakdown on the daily chart. The path of least resistance appears to down despite the tepid bounce.

More Ripple news

SafeMoon Price sees a dead cat bounce before the next downswing kicks in

SAFEMOON price is fading the recovery momentum this Saturday after falling for four days in a row earlier this week. Technical up on the 4H chart paints a bearish picture. RSI remains bearish, as more weakness likely in the near term.

More SafeMoon News

DOGE price eyes $0.1950 if key 100-DMA support caves in

Dogecoin sellers refuse to give up, as the bearish momentum extends into the fifth consecutive day on Saturday. Dogecoin price eyes a break below key 100-DMA support on the daily chart. The May 19 flash crash lows at $0.1950 remain on the sellers’ radars. 

More Dogecoin news

Cardano price stalls four-day losing streak, but not out of the woods yet

Cardano (ADA/USD) is snapping its four-day losing streak, attempting a minor recovery on Saturday amid a sluggish tone seen across the crypto market. ADA price is down about 3% over the week, having risen 750% from the start of the year. 

More Cardano News

BEST CRYPTO BROKERS/EXCHANGES



Bitcoin Weekly Forecast: Markets revert to mean, but BTC price remains indecisive

Bitcoin price shows considerable strength after springing from the recent crashes. Still, it is uncertain whether the current bullish impulse will morph into a new uptrend or lead to a more profound decline.

Read the weekly forecast

BTC

ETH

XRP