As recently as last week, Bitcoin soared to new highs after Coinbase, the leading crypto exchange, went public, listed on the NASDAQ as COIN. Shortly thereafter, on late Saturday, April 17, and into early Sunday morning, Bitcoin tumbled from $60,900 all the way down to $53,371, mostly on rumors and a power outage in the Chinese province of Xinjiang, home to many Bitcoin miners.
The power outage was probably more the issue than anything else, as the hash rate (speed at which Bitcoin is mined) fell precipitously, and took price, which correlates well to hash rate, down with it. The outage has since been fixed and Bitcoin's price has recovered somewhat, but it has continued to languish between $53,000 and $57,000 this week.
On Wednesday, the House of Representatives passed the Eliminate Barriers to Innovation Act, creating a joint working group between the Securities & Exchange Commission (SEC) and the Commodity & Futures Trading Commission (CFTC). Representatives from FinTech companies, financial firms, academic researchers, and investor watchdogs would also be invited to participate.
Within 90 days of passage into law, the working group would have one year to analyze the country’s current laws and regulations which affect digital assets. The legislation now heads to the Senate.
Meanwhile, according to Fox Business' Charlie Gasparino, the Biden administration is working towards a regulatory framework for cryptos via the Treasury Department headed by Janet Yellen. His sources tell him that Treasury is developing an overll approach to crypto regulation, which will give Gensler, the newly-appointed head of the SEC, guidance on specific rules and regulations. It's a very touchy issue and one that has some crypto investors worried.
Gasparino does not believe that the government would ban cryptocurrencies, but that regulations to track investments and reporting requirements will be forthcoming, possibly in a little as a month.
With so much attention focused on crypto at the highest levels of government, there's ample reason to be skeptical for the future of Bitcoin, Etherium, and other cryptocurrencies, altcoins, and decentralized finance (DeFi) as a whole. The US government is beholden to the central bank, the Federal Reserve, and their currency of choice is, of course, Federal Reserve Notes. Crypto poses a threat to the financial system, which is already facing serious headwinds from other fiat currencies. The US dollar has lost nearly all of its purchasing power and inflation is furthering its decline, another reason many investors and individuals are flocking to crypto and alternatives like gold and silver.
At issue is how the United States, European Union (EU), and other countries such as Canada, Great Britain, Australia, Russia, and China will deal with a novel currency which competes with their own favored fiats. It would not be beyond the pale to suggest that the G7 or G20, in cahoots with the World Bank and IMF to at some point outlaw cryptocurrencies or at least regulate them to the point at which they become useless.
Thus, there is nervousness among hodlers, though the widespread use and adoption of cryptocurrencies by major financial firms has so far kept governments at arm's length. For now, cryptocurrencies have been embraced by the likes of PayPal and their app, Venmo, Square, and other FinTech interests. Others, such as Elon Musk, CEO of Tesla, have made significant investments in Bitcoin, and, supposedly, other cryptos.
Because of the business angle, Gasparino is probably right. Government is unlikely to overreach and ban Bitcoin and others outright. The crypto universe is already worth more than $2 trillion and growing. There might be significant backlash if the government was seen to be overstepping its bounds. Skeptics argue that after the plandemic, lockdowns and mask mandates, the federal government is willing to stop at nothing to protect its self-interests. Individual states may have opinions of their own.
The situation is fluid, filled with suspense and moving parts. Upon the fate of Bitcoin may hinge the future of freedom and liberty in the United States and around the world. Nothing gets people's juices flowing like money and the government's handling of it, which, to date, has not been a stellar track record. In the background is the potential of FedCoin, the Federal Reserve's own digital currency (CBDC), which is reportedly in development, but likely still years away from implementation. It will take a wholesale collapse in financial markets to usher in a CBDC, but, unless you've been living under a rock, the potential for catastrophe has been a constant backgrounder ever since the GFC of 2008-09.
Already on the radar of governments around the globe, Bitcoin's revolutionary approach to currency is and will continue to be a bone of contention. Anonymity, which was initially a strength of the world's first cryptocurrency has been challenged and quite possibly already defeated. The IRS already has a checkbox on Income Tax Form 1040 asking whether or not the filer has engaged in cryptocurrency buying and/or selling. That's a major intrusion to privacy and threat to anonymity, as not telling the truth to the IRS can be costly as well as criminal.
This story has an ending, somewhere down the line, but, from all appearances, we're nowhere close to it.
A couple of final thoughts: with Bitcoin experiencing outflows, where did all that money go? Some of it may have gone into gold and silver, both of which have been gaining over recent days, with silver topping out over $26.50 on Wednesday and gold closing in on $1800.
As far as stocks are concerned, CNBC recently reported that the $569 billion invested in global equity from November 2020 to the present is more than all of the investment inflows from 2009 to 2020, $452 billion, proving somewhat definitively, that most of the stock market gains following the GFC were fueled primarily by the Fed and stock buybacks.
Wednesday, stocks were up across the board, with the Dow, S&P, and NYSE closing shy of their all-time highs. The NASDAQ continues to peek at it's Feb. 12 all-time high (14,095.12). It sits just 150 points short of that mark.
Unearthed is this video from March 1 with a mere 960 views which offers some insight to what Gary Gensler, the newly-confirmed head of the SEC, may do concerning Bitcoin and all cryptocurrencies. Gensler is supposedly pro-crypto, having taught classes related to cryptocurrencies at MIT. On the other hand, he was also head of the CFTC, which has a long-standing history of suppressing the price of precious metals, which may lead one to believe he may not be so friendly towards crypto.
This video from altcoin daily explains in some detail the cause of the recent Bitcoin mini-crash which, expectedly, morphed over to affect the entire crypto universe.
AT THE CLOSE, WEDNESDAY, APRIL 21, 2021:
Dow: 34,137.31, +316.01 (+0.93%)
NASDAQ: 13,950.22, +163.95 (+1.19%)
S&P 500: 4,173.42, +38.48 (+0.93%)
NYSE: 16,121.61, +177.00 (+1.11%)
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