Home Cryptocurrency News Bitcoin Are Wheels Coming Off Bitcoin's Bandwagon & Meteoric Rise Crunched By Reg Concerns?

Are Wheels Coming Off Bitcoin's Bandwagon & Meteoric Rise Crunched By Reg Concerns?

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Commodity Futures Trading Commission (CFTC) has stepped into the regulatory fray.

The key concern facing the bulls is the CFTC investigation into Tether and the Bitfinex exchange, and claims of full dollar convertibility are under scrutiny. It has been reported by Bloomberg that Bitfinex and Tether, the digital currency backed by the former’s executives, have been subpoenaed by the U.S. regulator according to informed sources.

Given there are around 2 billion Tether digital tokens in existence and are supposed to be backed by U.S. dollars (on a 1:1 basis), there should be a $2bn account somewhere. But Tether has yet to prove it or have accounts audited.

In the wake of this news investors rushed to get into digital token Digix, which rose sharply as other major cryptocurrencies sold off. Through its blockchain-enabled network it claims to enable investors to gain exposure to gold – traditionally regarded as a safe haven commodity.

Neil Wilson, senior market analysts at City of London brokerage ETX Capital, commenting said: “The idea that Tether is creating coins to buy bitcoin is straight out of satire. If bitcoin is a Ponzi scheme, then this is Ponzi squared; printing fake money to buy a different type of fake money in order to ramp up the price of the latter.”

He added: “If it weren’t likely to cause real world losses for many investors it would be hilarious.”

Meanwhile, the jaws of the regulatory crunch are seen as closing on other fronts with moves to ban or greatly restrict trading on bitcoin gaining traction worldwide.

Following moves by the Chinese and South Korea authorities, India has now come onto the regulatory radar.

Comments made by India’s Minister of Finance, Arun Jaitley, did not exactly help matters. Namely that the Indian government “does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.”

Miles Eakers, Chief Market Analyst at Centtrip, an FX brokerage in London, commenting said: “We anticipate there will be more of such protectionist regulation, which is likely to put Bitcoin under more strain.”

Ultimately if the CFTC were to decide that bitcoin prices have been manipulated, it casts a huge shadow on bitcoin and the wider – if not – the entire crypto market.

After breaching $9,200 – the previous low – prices  for bitcoin had declined to $8,300 by the close of the trading week on Friday, retreating below the 100-day moving average. They looked to be heading for $8,000 where they may find “some decent support” according to ETX Capital’s Wilson, as it sits on or around a series of lows tested in late November before demand pushed up the price to a record in December above the $19,000 mark.

Bloomberg/ETX Capital.

Bitcoin’s price evolution over the past one year to February 2, 2018. (Source: Bloomberg).

“Below this there is not a huge amount of support left – the $7,800 area constitutes the 61.8% of the rally from $1,000 to the peak near $20,000,” Wilson, London-based  Scot contended. (See: Bloomberg chart).

He added: “e HeThe next key support would be the 200-day moving average currently around $6,200. If the price cruises beneath this level there is a chance of a major sell-off that wipes out last year’s gains.”

On the upside, a bounce from $8,400 brings the $9,000 handle quickly back into focus. But trying to catch a falling knife is a risky game and hard a stroll in the park.

That said, for those who had bought into bitcoin at the start of 2017 the price is ten times to the good. And, some might even consider stepping into the market to acquire bitcoin, especially those who may have missed out on its stratospheric rise – not withstanding the cryptocurrency’s wild price gyrations. Caveat emptor.

Note: The CFTC provides resources on its website for market participants and customers regarding virtual currency and the regulator’s role in oversight of this emerging innovation, which can be accessed via this link.

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Might the proverbial wheels be coming off the bitcoin bandwagon? The market certainly seems spooked by recent regulatory oversight  in the U.S. and other countries, with the price of the ‘Big Daddy’ of digital currencies falling below the $8,000 market this Friday – the first time since November 24 – to a low of around $7,695. It did nevertheless mount a slight recovery.

The regulatory crunch appears closer than ever and sooner or later this market could be headed back down to earth. Selling pressure this Thursday and Friday was intense as there had been nothing but bad news for bitcoin bulls of late.

Aside from recent moves by the U.S. Securities & Exchange Commission (SEC) to halt a number of initial coin offerings (ICOs) – the latest being a an ICO from by AriseBank, a decentralized bank that claimed to have raised some $600 million – the Commodity Futures Trading Commission (CFTC) has stepped into the regulatory fray.

The key concern facing the bulls is the CFTC investigation into Tether and the Bitfinex exchange, and claims of full dollar convertibility are under scrutiny. It has been reported by Bloomberg that Bitfinex and Tether, the digital currency backed by the former’s executives, have been subpoenaed by the U.S. regulator according to informed sources.

Given there are around 2 billion Tether digital tokens in existence and are supposed to be backed by U.S. dollars (on a 1:1 basis), there should be a $2bn account somewhere. But Tether has yet to prove it or have accounts audited.

In the wake of this news investors rushed to get into digital token Digix, which rose sharply as other major cryptocurrencies sold off. Through its blockchain-enabled network it claims to enable investors to gain exposure to gold – traditionally regarded as a safe haven commodity.

Neil Wilson, senior market analysts at City of London brokerage ETX Capital, commenting said: “The idea that Tether is creating coins to buy bitcoin is straight out of satire. If bitcoin is a Ponzi scheme, then this is Ponzi squared; printing fake money to buy a different type of fake money in order to ramp up the price of the latter.”

He added: “If it weren’t likely to cause real world losses for many investors it would be hilarious.”

Meanwhile, the jaws of the regulatory crunch are seen as closing on other fronts with moves to ban or greatly restrict trading on bitcoin gaining traction worldwide.

Following moves by the Chinese and South Korea authorities, India has now come onto the regulatory radar.

Comments made by India’s Minister of Finance, Arun Jaitley, did not exactly help matters. Namely that the Indian government “does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.”

Miles Eakers, Chief Market Analyst at Centtrip, an FX brokerage in London, commenting said: “We anticipate there will be more of such protectionist regulation, which is likely to put Bitcoin under more strain.”

Ultimately if the CFTC were to decide that bitcoin prices have been manipulated, it casts a huge shadow on bitcoin and the wider – if not – the entire crypto market.

After breaching $9,200 – the previous low – prices  for bitcoin had declined to $8,300 by the close of the trading week on Friday, retreating below the 100-day moving average. They looked to be heading for $8,000 where they may find “some decent support” according to ETX Capital’s Wilson, as it sits on or around a series of lows tested in late November before demand pushed up the price to a record in December above the $19,000 mark.

Bloomberg/ETX Capital.

Bitcoin’s price evolution over the past one year to February 2, 2018. (Source: Bloomberg).

“Below this there is not a huge amount of support left – the $7,800 area constitutes the 61.8% of the rally from $1,000 to the peak near $20,000,” Wilson, London-based  Scot contended. (See: Bloomberg chart).

He added: “e HeThe next key support would be the 200-day moving average currently around $6,200. If the price cruises beneath this level there is a chance of a major sell-off that wipes out last year’s gains.”

On the upside, a bounce from $8,400 brings the $9,000 handle quickly back into focus. But trying to catch a falling knife is a risky game and hard a stroll in the park.

That said, for those who had bought into bitcoin at the start of 2017 the price is ten times to the good. And, some might even consider stepping into the market to acquire bitcoin, especially those who may have missed out on its stratospheric rise – not withstanding the cryptocurrency’s wild price gyrations. Caveat emptor.

Note: The CFTC provides resources on its website for market participants and customers regarding virtual currency and the regulator’s role in oversight of this emerging innovation, which can be accessed via this link.

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