Another critical hit! This country's cryptocurrency exchange has suspended trading. Can the central bank bear it? International banks have issued warnings. Can Bitcoin rise again?

On April 21st local time, the Turkish cryptocurrency exchange THODEX suddenly announced the suspension of trading, which once again caused a stir in the cryptocurrency circle.

On the eve of THODEX's announcement of the suspension of trading, the Turkish Central Bank will ban the "direct or indirect" use of cryptocurrencies in payments from April 30, citing possible "irreparable" damage and transaction risks.

From this point of view, THODEX’s announcement of a suspension of trading seems to be related to the ban issued by the Turkish Central Bank.

Since the flash crash last weekend (April 18), the price of Bitcoin has been fluctuating at a low level. On April 21, it fell again by more than 4%, and the price of the currency fell below the $54,000 mark. This also made Wall Street analysts feel a little worried. JPMorgan Chase strategists pointed out in their latest report that if Bitcoin cannot return to above $60,000 in the short term, the momentum signal will collapse.

Cryptocurrencies, led by Bitcoin, have yet to recover from the weekend flash crash when they are once again hit by bad news.

On April 21st local time, the Turkish cryptocurrency exchange THODEX suddenly announced the suspension of trading.

According to public information, THODEX is a cryptocurrency exchange founded in 2017 and headquartered in Turkey. It has obtained the US FinCen MSB license and is the first licensed global cryptocurrency exchange in Turkey. It has begun to recruit users worldwide and has developed relatively maturely.

The exchange's sudden announcement of a suspension of trading caused quite a stir in the global cryptocurrency community, which may be related to the Turkish government's regulatory ban.

On the eve of THODEX’s suspension, Turkey’s central bank said it would ban the “direct or indirect” use of cryptocurrencies in payments from April 30, citing possible “irreparable” damage and transaction risks.

Some analysts pointed out that the Turkish central bank's ban on cryptocurrencies is closely related to its monetary policy. In mid-March, the Turkish president suddenly fired the former central bank governor Naci Agbal. The new Turkish central bank governor Sahap Kavcioglu changed his predecessor's hawkish style and kept the key interest rate unchanged at 19%, continuing to maintain a loose monetary policy. This has caused more and more Turkish people to worry that the depreciation of the lira may further intensify, and the country's hyperinflation will become increasingly difficult to curb.

As a result, the Turkish people's demand for asset preservation has rapidly increased, and there has been a trend among the people to exchange lira for cryptocurrencies.

According to blockchain analysis company Chainalysis, the volume of cryptocurrency transactions in the Turkish market has soared since the former central bank governor was fired. From the beginning of February to the end of March, the volume of cryptocurrency transactions reached 218 billion liras, compared with only 7 billion liras in the same period of 2020. Among them, from March 20 to 24, when Agbal was fired and caused turmoil in the Turkish market, the volume of cryptocurrency transactions in Turkey reached more than 23 billion liras in just a few days.

The massive selling of lira further increased the pressure of currency depreciation, forcing the Turkish Central Bank to urgently introduce corresponding measures.

In fact, the largest cryptocurrency exchange in Türkiye is not THODEX, but BtcTurk, which has more than 1 million users trading on the platform, and there has been no news of suspension of trading.

As the Turkish central bank takes action, the market expects that Morocco, which faces the same dilemma, may follow Türkiye and introduce similar regulatory policies on encrypted digital currencies.

Since Bitcoin is a global investment product, the regulatory attitudes released by governments of different countries will have a direct impact on prices.

On April 18, the market reported that the U.S. Treasury Department was planning to crack down on money laundering schemes involving cryptocurrencies. This directly led to a flash crash in Bitcoin, with the largest drop of more than 15% on that day. Since then, the price of Bitcoin has been fluctuating at a low level. On April 21, it fell again by more than 4%, and the price of the currency once fell below the $54,000 mark.

Looking back at the previous rounds of Bitcoin flash crashes, new buyers entered the market to buy on dips, supporting the price to further stop falling and rebound. But this time, Wall Street analysts felt a little worried. JPMorgan strategists pointed out in their latest report that if Bitcoin cannot return to above $60,000 in the short term, the momentum signal will collapse.

JPMorgan strategists said that in the past few days, Bitcoin futures have experienced a sharp sell-off similar to that in mid-February, mid-January, and late November last year. Considering that the current momentum signals are still at a high level, they will gradually become weak in the next few months.

The report noted that in the three previous major declines, overall liquidity was strong enough to enable Bitcoin to quickly break through key thresholds, thereby driving momentum traders to further build positions.

Will a similar situation happen again this time? In the view of JPMorgan strategists, this possibility seems low, because the trend of momentum decay seems more difficult to reverse this time. In addition, the funds flowing into Bitcoin funds also seem weak.

In addition, the report suggests that there is no new positive expectation, the market lacks effective stimulus, and the accumulation of too much profit-taking in the previous period has caused a certain amount of selling pressure. Among them, the long positions of Bitcoin futures accumulated by commodity trading advisors (CTAs) and crypto funds in recent weeks have been the driving force behind the liquidation and smashing of these positions in the past few days.

There is no doubt that Bitcoin is the biggest winner in this round of global central bank money printing. A large amount of safe-haven funds and inflation-averse funds have poured into Bitcoin, and the price of the currency has soared from a low of $3,155 per coin at the end of 2018 to a high of $64,000 per coin.

Even after the new year, when core assets of public funds and stock markets continued to fall, Bitcoin continued to rise. Some investors said, "I didn't expect Bitcoin to become the most resilient safe-haven asset."

According to CoinShares data, as of the end of the first quarter of 2021, the size of digital currency assets managed by institutions soared to a peak of US$59 billion, compared with only US$37.6 billion last year.

Looking at the entire cycle, Bitcoin's bull and bear markets are almost the norm. Over the past 12 years, the price of Bitcoin has been like a roller coaster, affecting the hearts of countless people, with crazy rises and bubble bursts alternating.

All investors who hold crypto assets such as Bitcoin do so with the intention of selling them at a higher price in the future, rather than holding them for the long term. Unlike traditional assets such as stocks and real estate, Bitcoin cannot generate positive cash flow. Therefore, in the long run, if Bitcoin cannot obtain payment properties, its investment returns will almost entirely come from transactions that earn the difference in price.

Whether Bitcoin can acquire payment attributes depends entirely on the regulatory attitude of governments in various countries. Judging from the current situation, the possibility of Bitcoin "taking the lead" in a long period of time is extremely low.

In addition to Turkey mentioned above, India is undoubtedly the most resolute in regulating cryptocurrencies. According to Reuters on April 18, the Indian government will ban cryptocurrencies, impose fines on those who trade or even hold such assets in the country, and will criminalize the possession, issuance, mining, trading and transfer of crypto assets.

The attitude of the People's Bank of China is also very clear. Li Bo, the current deputy governor of the central bank, clearly pointed out at the just-concluded Boao Forum for Asia 2021 Annual Conference that Bitcoin is a crypto asset, crypto assets are investment options, and are alternative investment tools. They are not currencies themselves. The regulatory rules for Bitcoin and stablecoins are currently being studied.