Crypto and Bitcoin look like they’re in a better place this morning, but regulation looms over the wider market.
Cryptocurrency update
Bitcoin and altcoins gain a bit of confidence
At the start of the week, crypto markets were sliding into the red with wild abandon. While volatility is always bubbling under the surface, things are looking better as of Friday morning. BTC was struggling.
Bitcoin, which started the week around the $32,000 level, is now up 1.46% on the day and trading for around $36,666. The daily high so far is $37,435.
Ethereum is up 1.81% at the time of writing, while other coins like Ripple are showing similar performance.
Is the latest crypto crash over?
Investors appeared to be divesting themselves of riskier assets like crypto following a series of hawkish Fed pivots. The subsequent sell-off sent coin prices on a death spiral into the red. Only now it appears they’ve started to recover.
Of course, volatility is the name of the game when it comes to crypto trading. Investors continue to sell.
According to Glassnode blockchain data, 18,000 BTC tokens worth a cool $670m left centralised exchanges on Thursday 27th January. That was the largest single day outflow of 2021 so far.
Paradoxically, this may have triggered to daily uptick in prices we’ve seen so far. Increased outflows means less coins available on exchanges. The subsequent tightening of supply means the basic principles of supply and demand kick in.
But the Fed saying it will commit to five 0.25% rate hikes across 2022, central liquidity-tied assets like crypto currencies could be in for a wild ride throughout the year.
Then there is regulation. Noise from the SEC suggests a tighter regulatory framework is on the way.
White House to step up crypto regulation
News is that the Biden White House will be creating and tasking agencies with regulation of crypto as a top priority. In fact, this current presidency sees regulating the digital finance sector as a matter of national security.
Agencies, such as the SEC, will be required to closely monitor digital assets, their sales and use, and put together a regulatory framework covering all the big issues around DeFi and crypto. This would also include NFTs.
Essentially, be on the lookout for a new White House executive order detailing all the above.
The White House joins others like the Bank of England looking to improve the monitoring and regulation of decentralised and digital finance. Governor Andrew Bailey has been particularly vociferous about his concerns regarding investor security and protection. Basically, Bailey’s of the opinion crypto investors and traders are on course to lose all their money.
But because the whole point of decentralised and blockchain networks is to take finance out the hands of central banks and finance ministries, any regulation would really require a global approach. No one country can handle all its complexities alone.
As it stands, it appears the US and the White House are not pro-Bitcoin.
Senator targets crypto miners
Democratic Senator Elizabeth Warren has widened an enquiry into Bitcoin miners and their energy use by targeting six further mining operations.
Riot Blockchain, Marathon Digital Holdings, Stronghold Digital Mining, Bitdeer, Bitfury Group, and Bit Digital have all come under scrutiny from the Warren-led enquiry, with their “extraordinarily high energy use” cited.
In December 2021, Warren had previously contacted Greenridge, another BTC miner, about the organisation’s energy consumption.
In a letter sent to the six miners listed above, Warren and co. have asked the targeted miners to detail their electricity use, scaling plans, and relationship with energy suppliers to discuss the potential impact they have on consumers and small businesses.
Targeted miners will have until February 10th to respond.
“The extraordinarily high energy usage and carbon emissions associated with Bitcoin mining could undermine our hard work to tackle the climate crisis – not to mention the harmful impacts crypto mining has on local environments and electricity prices,” Warren said in the letter.
Most recently, the US held a congressional hearing to discuss the energy consumption related to the PoW.
Meanwhile, EU markets regulator Erik Thedéen called for a ban on the validation system, citing its energy intensity.
FR
