Crypto markets fall to lowest levels since the high on too much FUD. Prior to the U.S Senate met on February 6th to discuss "virtual currencies" such as Bitcoin.
Market Context
The industry topped $700 bln in January, and one analyst projected it has a “longer term” potential of $10 tln. But the crash has left the total market cap of all cryptocurrencies is at $388 bln, seeing gains of over $100 billion since Tuesday’s low of $276.8 bln.
Bitcoin’s price has been trading at an average of $8,280, according to CoinMarketCap at the time of writing.
On Tuesday, Feb. 6 the Senate Committee on Banking, Housing, and Urban Affairs held a hearing exclusively devoted to virtual currencies with Clayton and Giancarlo as the sole witnesses.
“The SEC will vigorously pursue those who seek to evade the registration, disclosure and anti-fraud requirements of our securities laws.” And all participants in the industry are being closely monitored, including “broker-dealers, investment advisers, and trading platforms.” stated SEC Chairman Clayton when addressing the hearing.
In response, John Kennedy, US senator from Louisiana, said the disclosure and prospectus requirements by the Securities Act do not work. A groundbreaking statement in a meeting about consumer protections essentially in respect to crypto but financial instruments as a whole. Addressing Christopher Giancarlo, CFTC’s Chairman, he enquired whether he had read a stock’s prospectus before buying it. Giancarlo replied that as an attorney he should not say no, but that in all honesty, he had not read them.
“I don’t think disclosure works, it’s good for lawyers, and financial advisers, but we over-disclose,” Kennedy said before further adding “So what, you can get your lawyers to write a great disclosure on bitcoin, then pick 15 names from the phone book, say read this, tell me if it makes any sense, and none of them will think it makes any sense. What’s the point?” Kennedy asked.
Pointing to the obvious windfall for the legal community that has already dabbled in the cryptocurrency industry. Several large firms have practices focused on Blockchain and digital coins, but others will soon follow, and the practices will only grow and become more sophisticated. With an explosion of intellectual property application for DLT or Blockchain technology.
Ultimately, the cryptocurrency industry has some difficult issues to overcome, like “scam” and “fraud,” but none more obvious than Venezuela's controversial plan to create an oil-backed cryptocurrency which ignited debate and discussion at a U.S. Senate hearing Tuesday.
The issue of actions by other nations that saw notable discussion later in the session, when talk turned to Venezuela and public boasts by its President Nicolas Maduro that the country could use an ethereum-based cryptocurrency to avoid sanctions. The issue was prominently raised by New Jersey Senator Bob Menendez, who asked whether both agencies would play any role in preventing the use of the cryptocurrency to avoid U.S. financial sanctions.
It was mentioned many times at the hearing that exchanges weren't adequately regulated due to state-specific legislation and the idea that money transmitter licenses weren't designed for such secondary market trading. That said, the SEC chair also made the point he wants, from a regulatory perspective, to separate cryptocurrencies from those digital assets that are clearly securities under U.S. law. "I believe every ICO I’ve seen is a security," Securities and Exchange Commission chairman Jay Clayton declared early on, perhaps setting the tone on a topic that would be raised numerous times during the roughly two-hour hearing.
Another important detail that many seemed to ignore was that the focus of the meeting seemed to be on how blockchain was valuable, but cryptocurrencies weren't. The only people who seemed to argue against this idea was CFTC Chair Giancarlo and Senator Warren.
If the SEC goes after Crypto, will they bring down the house of cards that is Tether?
FUD in the news to follow?
We will wait and see.
Crypto Apocalypto: The Factors that led to the correction of early 2018
All before the final straw in early February many banks instituted a block on all cryptocurrency purchases via credit card after Bitcoin (BTC) saw a large price drop in the market this week, pushing down Bitcoin to sub $5,873 on Coinbase on Feb 5.
Who?
Lloyds Banking Group, the largest bank in the UK, has become the first major credit card provider in the country to ban its customers from using credit cards to buy cryptocurrencies, the ban follows directly on the heels of J.P. Morgan Chase, Bank of America, and Citigroup’s identical decision yesterday to ban credit cards purchases of cryptocurrencies for their customers. Virgin Money, a financial services company present in Australia, South Africa, and the United Kingdom, has followed several US and British banks by banning credit card purchases of cryptocurrencies.
What?
Lloyds Banking Group announced their credit card crypto ban on Feb. 5, after J.P. Morgan Chase, Bank of America, and Citigroup had all banned their customers on Feb. 3 from purchasing digital currency with credit cards.
Where?
The traditional markets saw a similar slump yesterday, with the Dow Jones Industrial average down over 1,100 points and the S&P 500 Index losing its January gain. All these factors were too much for crypto this week as we look back at the last week’s performance by market cap.
How Coinbase fights back?
To combat the lack of liquidity from credit cards, Coinbase announced the ability for customers to instantly purchase digital currency using a US bank account. Previously, customers who purchased using a bank account had to wait several days before receiving their digital currency. Customers can now buy up to $25,000 and receive access to their digital currency immediately. Instant bank purchases are now live for many of our customers in the US, and we will expand availability over the coming months.
Conclusion
The rebound can be attributed to the outcome of the hearing on cryptocurrency and Blockchain, During the hearing, CFTC chairman J. Christopher Giancarlo expressed optimism about Bitcoin with regard to the technology behind it, Blockchain or Distributed Ledger Technology (DLT): “If there was no Bitcoin, there would be no DLT.”
Many interpreted this meeting as bullish for Cryptocurrencies, primarily because of CFTC Chair Giancarlo's testimony.
However, the more likely outcome is the need for the US and its regulatory agencies to clean up the crypto space from fraudsters and scammers or at least make a show of it. Expect regulators to show of force to set an example before allowing the US Investors to catch up to their Canadian counterparts who can now invest in a Bitcoin ETF.
As regulation and enforcement do take shape the space will mature. With the crypto industry developing so quickly it seems like we may be at or near the end of this bear market. Until then more bad news could see us dip further into the next lower resistance level from the last dip somewhere in 5,500's before technological upgrades kick off the next bull run, something like a successful launch of the Lighning Network comes to mind. But a failure or hack of an American exchange or the loss of an Exchange like Binance, who was recently down and was rumored to having been hacked while doing a system upgrade. These scenerios coul wreck havoc on the price and send us sub 4,000's.
Ths will likely be the last time we visit these lows, but only time will tell.
Cheers,
Better Than Money
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