Will Cryptocurrencies Come Out of This War Victorious?
Cryptocurrencies were taking all the attention in the financial market late last year and in the first few months of 2021, as they put up the biggest rally ever seen in any financial asset. Most of the cryptos surged to 10 to 20 times their 2020 value, and the uptrend was only picking up speed until the middle of May, when the “War on cryptocurrencies” came into the mainstream.
Cryptocurrencies made a reversal, which at first seemed like a normal pullback lower before the bullish trend resumed again, as we saw during the first 4 or 5 months. But this time it was different; we saw a sudden crash in the crypto market, with a loss of more than 50% of its value in total, while certain cryptocurrencies like Maker MKR, Binance BNB or Aave AAVE lost more than 70%, and RIPPLE XRP LITECOIN LTC more than 75%. We highlighted the Binance losses in our crypto forecasts page.
This came after China declared war on cryptocurrencies, particularly on Bitcoin mining and exchange, which soon accelerated across the country, turning the sentiment quite bearish in the crypto market for two months. The founder of the Bitcoin mining pool BTC.TOP, Jiang Zhuoer, said earlier this week that “he believes that the crypto industry in China is heading towards a complete ban, where no crypto entity will be allowed to operate or run legal offices”. China continues to punish companies with ties to cryptocurrencies.
But that’s not all! The US regulatory body, the SEC, has opened a legal battle against Ripple Labs, which is the parent company of the Ripple coin (XRP). The battle is ongoing and is likely to last for months to come. Besides that, the Binance exchange has been sort of banned by financial authorities in the UK and in Japan. Binance is also facing a criminal inquiry, which was opened by Thailand’s Securities and Exchange Commission (SEC). They issued a stern warning on Friday, July 2, accusing Binance of conducting its crypto business illegally in the country.
According to the Bank for International Settlements (BIS), “Cryptocurrencies and stablecoins established within the private sector all tend to work against the good of the public,” and the Reserve Bank of India (RBI) has been in a cold war with India’s crypto industry for a while. In the US, the Senate and the SEC are trying to target cryptocurrencies, under the anti-money laundering regulatory standards, by classifying them as real money.
Will Cryptos Survive the War and Allow it to Emerge Victorious on the Other Side?
Bitcoin fell to $30,000 during the initial crash, from almost $65,000, and it continued lower during the second wave of the crypto selloff in June, falling to $29,000. Meanwhile, the losses have slowed considerably since the initial crash in May, and some of the cryptos are itching to resume the bullish trend again.
After all, if China and certain governments decide to ban cryptocurrencies and mining altogether, other countries will take advantage of this opportunity to bring revenue into their country, especially in the times of coronavirus, when the outlook for business is really uncertain. On Thursday, Gryphon Digital Mining, a big US mining business, purchased a large batch of crypto mining rigs from Bitmain, a Chinese mining powerhouse that had to cease its spot sales, due to China’s crypto mining crackdown. Due to miner capitulation in China, Miami mayor Francis Suarez officially asked foreign crypto mining businesses, in June, to explore the possibilities of installing data centers in the city.
More countries, such as El Salvador and Peru are already legalizing cryptocurrencies, and by now, the public is used to using and trading cryptocurrencies. So, any disruption will be just that, and won’t turn into a capitulation for this market. But, for now, the uncertainty remains high in this market as well, although the initial fear has waned somewhat. So, it might be time to build a long position on cryptocurrencies and follow the price action, which is pointing up increasingly.
Top 4 Brokers
