Impact of Crypto Regulation on Bitcoin (BTC)
BWhen I started writing about Bitcoin in 2014, one of the things I found most attractive about it from a trading perspective was that it was a market that didn’t follow any rules or adhere to any conventions. It completely ignores what is seen as support or resistance points in other markets. It opened up many opportunities to those who recognized it and were disciplined enough to work it to their advantage. However, in the last eight years, everything has changed.
Now the price of Bitcoin (BTC), in dollars, is a much more mature market. Big corporations and mutual funds are such big players on Wall Street that it seems to cause mixed feelings among OG coiners. Of course, most will be happy with what is made for this price. Even at around $20,000, the price is measured in hundreds of dollars or less (except for those who invested when Bitcoin hit $60,000 last year), a joy to those involved. Even for those who have benefited from the right side and have minimal stakes, such levels are justifiable. Bitcoin investors have been accused of being crazy over the years, but those who refuse to invest have turned out to be the craziest.
This brings us to today. There is a feeling among some members of the BTC community that Bitcoin has sold out. He should have stood up to Wall Street, not his plaything. I personally don’t mind. I’ve always been interested in the concept of cryptocurrency, but neither anarcho-communist nor libertarian, and I’ve never seen it as a tool to overthrow the government. To me it was a commercial vehicle, but I found it to be an elegant solution to the potential problems of an inflationary monetary system, and intellectually appealing as a concept.
That’s why, even at the beginning, I recognized that cryptographic regulation was not only inevitable, but necessary. Now it seems that such a regulation is coming. Many states, including, in some respects most notably, New York, now have regulations in place or are pending. Some have taken the sensible but time-consuming approach of writing crypto-specific laws and regulations with industry input, while others have tried to incorporate crypto into existing securities regulations. Either way, most are doing something this year after the Celsius explosion and the FTX saga.
The market’s reaction to this last month is interesting.
Even against the backdrop of environmental risk, BTC/USD’s year-to-date gains are impressive. It closed at 16,638.30 on January 1 and is trading at 22,924.00 at the time of writing, a gain of 37.78% in just over three weeks. The outlook for US cryptocurrency regulation is clearly positive.
If nothing else, the FTX case told us that despite the resources and paid researchers at their disposal, some Wall Streeters can be fooled by telling them what they want. Hearing. Basically, they seem to understand that they need someone to protect them from their greed.
What matters to me is not Bitcoin politics or Wall Street greed. I focus on my own greed, the greed of a trader where everything is measured by market impact. In that sense, even increased regulation of the lazy and clumsy kind is a good thing for crypto, at least for now. This creates regulatory certainty and allows more institutional players to participate, supporting the price of BTC. If BTC/USD is strong, other smaller altcoins have a chance to survive, and that has been in doubt for about six months. This creates a self-fulfilling bull market where the strength of BTC brings other coins to life, and gains in it bring more support to BTC, support other cryptocurrencies, etc.
This could push the price much higher, but one of the side effects of Wall Street’s increased interest in BTC is that the once wild and unpredictable market is now much more similar in terms of exposure. The points on the chart, for example, are important now, and there are several. As you can see, Bitcoin’s decline was basically in two big dips, one from around $40,000 to around $30,000, and then after that for about a month, the other was below $20,000. This was followed by a bounce just below $25,000 before another decline.
Simple as it sounds, $25,000 and $30,000 represent important levels for the next few months. The high-profile challenge seems unstoppable and can be expected soon. A break there, followed by another move to $30,000, seems very likely, unless there is a sudden and deep recession that leads to the selling of all risk assets.
Many people in the cryptocurrency world look down on any form of regulation and say that the laws being proposed and passed across the country will kill the industry completely. However, if you believe in evidence rather than political theory, the opposite appears to be true, and BTC/USD could benefit once regulations are passed and implemented. Hence, further gains seem possible from here.
* In addition to contributing here, Martin Tillier works as a research lead on the cryptographic platform SmartFI.
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