Increased Mainstream Coverage Drawing Increased Focus From Regulators

As of this moment, the price of 1 Bitcoin (the most popular cryptocurrency) currently sits at $11,689.98 USD.

Bitcoin has been on a tremendous rollercoaster ride over the past year, with the cryptocurrency enjoying a parabolic move higher as it garnered more and more mainstream attention. After hitting $20,000 USD, Bitcoin tumbled to below $10,000 and has now "stabilized" in the $11,000-$12,000 region.

Bitcoin's parabolic rise over the past couple of years and subsequent appearance in the mainstream is a double-edged sword. The increased interest from the public has resulted in a greatly increased value, though regulators are now taking even more interest. A few years ago, cryptocurrencies were merely an afterthought for governments around the world - now, due to the tremendous amount of money that is attached to the industry, regulators in more countries are starting to voice caution about the "dangers" of "speculating" in cryptocurrencies. The writing on the wall is clear - regulation, and perhaps outright bans, might be coming.

There is precedence here - in the early 2000s, US regulators instituted the "pattern daytrader rule", which was designed to restrict the amount of trades that "small" investors could perform in a single week, regardless of how successful they were. In actuality, the major brokerages were losing trading commissions to smaller firms like Datek, E-Trade and others, and sought to change the rules in their favor once the "dot-com bubble" burst in 2000. At the time that these rules were pushed through, millions of Americans were disgusted with the stock market and had stopped trading. These rules still exist today. At the time, online trading was disrupting the "status quo" that put billions of dollars per year into the pockets of Wall Street's biggest firms, and they changed the rules at the first opportunity to benefit themselves.

Could something similar happen in regards to cryptocurrencies?

Cryptocurrencies are designed to remain out of the watchful eye of the government, though there is plenty that governments could do to disrupt the flow of money into cryptocurrencies.

Am I a doomsayer? No - I own some cryptocurrencies. I just point out that a government crackdown, especially in the United States, remains the biggest bear case against coins like Bitcoin. Governments will never be able to stop cryptocurrencies like Bitcoin from existing, though they can certainly make it hard to fund the purchase of these coins if they wanted to.

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The possibility of government action (from a variety of different governments around the world) is weighing on cryptocurrencies right now.

The next few months is a very important time (in my opinion) in terms of the future direction of crypto prices. With mainstream coverage of Bitcoin, etc. at all-time highs, this is likely the time that governments would act to regulate the trading of cryptocurrencies.

If nothing really happens on that front and Bitcoin passes the $20,000 USD mark once again, you could very well seen another upwards move that takes the coin to $50,000 or even higher.

If Bitcoin continues to stagnate over the coming months, some of the late adopters of the technology might start to lose interest.

Filed under: General Knowledge