End of Bitcoin or an Opportunity to Buy?

Is this the long-predicted end of bitcoin or an opportunity to buy before the price skyrockets again? A couple of weeks ago we asked will bitcoin survive the crackdown. Governmental regulation has always been a background threat to cryptocurrencies as the feeding frenzy continues and we asked what should bitcoin be worth. Now, it would appear that investors are taking seriously the risk of governmental intervention and regulation. Reuters reports that the cryptocurrency selloff intensifies as bitcoin and others fall.

The currencies have come off their lows but analysts said the sell-off was probably not over.

This week’s slump brought the total market value of cryptocurrencies down to around $400 billion, half the high it reached in January, according to industry tracker Coinmarketcap.com. The market value of cryptocurrencies is calculated by multiplying the number of digital coins in existence by their price, although many question whether that is the right way to value them.

Bitcoin, the biggest and best-known cryptocurrency, fell as much as 15 percent on Friday to a two-month low of $7,625 on the Luxembourg-based Bitstamp exchange BTC=BSP. It clawed back some losses and was down around 4.1 percent at $8,623.50 in mid-morning New York trading.

The virtual currency is down by close to 25 percent this week and almost 40 percent in 2018.

The most recent threat of regulation came as India joined China and South Korea in threatening to limit or ban aspects of cryptocurrencies in their nations. The question is this just another setback from which bitcoin and the others will recover? That has certainly happened before and while the volatility in this sector has caused many to lose money, others have profited handsomely. The question really is if more governmental regulation will enter the picture and how that might affect cryptocurrencies. A useful way to look at this might be to consider bitcoin futures.

Coindesk reports that the US Commodities Regulator is strengthening is Bitcoin futures review.

The Commodity Futures Trading Commission (CFTC) is developing a “heightened review process” for cryptocurrency futures though it will continue to allow exchanges to self-certify products, Chairman J. Christopher Giancarlo announced last week.

Others have been scrutinizing the process as well, including some members of the U.S. Congress.

Yesterday, top Senate Agricultural Committee members sent a letter to Giancarlo requesting information on the CFTC’s oversight of bitcoin futures and options markets. The senators specifically requested information regarding the Commission’s market surveillance and its implementation of safeguards against bitcoin’s volatility.

“American taxpayers deserve strong safeguards against fraud, manipulation, and abusive practices in the futures and options markets,” the letter stated. “The CFTC plays a critical role in protecting customers and the markets from harm.”

A small amount of regulation may or may not hurt the value of bitcoin and other cryptocurrencies. But, the threat of increased regulation may be enough, for now, to drive investors out of the cryptocurrency market and thereby drive prices down. On the other hand outright bans on cryptocurrency trading across the globe could spell the end of the bitcoin feeding frenzy.

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