Bitcoin Shows Resilience Amid Global Political Pushback
The cryptoasset market remains in something of a funk. Having been knocked off course by Tesla’s announcement that it would no longer accept bitcoin (BTC) as payment for its cars, it has been dragged further down by a steady stream of governmental and regulatory pushback.
From China’s crackdown on mining to regulatory warnings against Binance, a number of governmental actions have served to keep crypto moving sideways, or backwards. However, while industry observers mostly agree that such actions have been a negative influence on the market, they also agree that they haven’t been as negative as they could have been.
In fact, commentators speaking to Cryptonews.com affirm that bitcoin’s stubborn clinging to a resistance level of USD 30,000 is as much a sign of resilience as it is of weakness. At the same time, they affirm that governmental and regulatory action can’t subdue cryptocurrency in the long run, with Bitcoin in particular designed to evade centralized control.
Governments act, cryptocurrency falls
“Government actions, particularly in China, have had a significant negative near term impact on the crypto market,” said Lou Kerner, a partner at Blockchain Coinvestors.
China reminded its financial institutions of an old anti-speculation law on May 18, at a time when BTC had already dropped from about USD 58,000 to USD 45,000. This news then caused BTC to plunge as low as USD 35,000 in three days, with the rest of the cryptoasset market following suit.
“That was followed in June by a severe crackdown on Bitcoin mining in China. Along with other government moves, many Chinese were forced to liquidate, at the same time as demand for crypto in China declined,” Kerner told Cryptonews.com.
Other analysts agree with this assessment, even if they suggest that governmental/regulatory actions aren’t the only cause of the market’s current woes.
“I think the biggest factor impacting prices of cryptocurrencies in a negative way has been the impact of recent government and regulatory actions from China to the US and elsewhere. The dollar’s recent recovery has been the other culprit,” said Fawad Razaqzada, an analyst at ThinkMarkets.
Aside from China, the United States has been another site of governmental interventions related to crypto. In the past few weeks, we’ve seen calls from the Internal Revenue Service (IRS) for stricter regulation, investigations into Binance from the Commodity Futures Trading Commission (and the Department of Justice and IRS), and demands from lawmakers for harsher rules in the face of ransomware attacks.
That’s just the United States. Regulatory and governmental actions have occurred elsewhere over the past month, from the UK and the EU to Singapore, Thailand, and others. In that time, the total value of the cryptoasset market has declined from over USD 2trn to around USD 1.3trn.
Resilience in the face of regulation
Nonetheless, most analysts claim that the market has fared better than some may have expected, particularly given the extent of the crackdown in China.
“I think these government actions have absolutely had a short term negative effect on prices. However, we’ve now seen that bitcoin does not want to go below USD 30K — it didn’t crash down to USD 3K again,” said Mark Jeffery, the founder/CEO of emergency response network Guardian Circle.
He suggested that pushing bitcoin down is like “trying to hold a beach ball underwater.” He also highlighted how, by this point, it benefits from a growing number of hodlers and whales, or large holders of BTC, willing to accumulate coins during a downturn.
“The older wallets simply refuse to sell — kind of no matter what. They know that bitcoin has held its value better than the dollar for ten years now,” he told Cryptonews.com.
Fawad Razaqzada also said that encouragement should be taken from the fact that bitcoin isn’t back down to USD 10,000, where it was before the market began picking towards the end of 2020.
“Well, looking at bitcoin prices, they have been going sideways between USD 30K to USD 40K for the best part of two months now. The fact that we are not seeing significantly lower prices due to rising levels of regulation and governmental actions indicate resilience and strength for Bitcoin and other cryptos rather than weakness,” he said.
However, even though bitcoin has hit a seemingly strong support level, it needs to be remembered that governmental actions, alongside other factors, brought it down from nearly USD 65,000 pretty quickly.
“The market’s sharp negative reactions to these moves highlight the market’s infancy, and the lack of depth of buyers to step in as Chinese selling accelerated, and Chinese buyers slackened,” said Lou Kerner.
Anathema to government
Despite the obvious fact that bitcoin has halved from its all-time high of around USD 65,000, industry figures are confident that governments can’t really do all that much to keep it down in the long term.
“But I think ultimately trying to stop Bitcoin is like trying to stop the Internet: you can’t,” said Mark Jeffery.
He suspects that we’ll witness a rising number of ‘attacks’ from governments and regulators.
“We will definitely see demands for exchange KYC [know your customer] increase — the idea of anonymous wallets and transactions is anathema to government: they like a financial panopticon. Their stated reasons for this are AML [anti-money laundering] and terrorism, which are legitimate to some extent, but are not, I suspect, the real reasons,” he said.
Jeffrey is particularly worried about decentralized finance (DeFi) platforms and decentralized exchanges (DEXes), which tend to flout governmental wishes for transparency quite flagrantly.
“If these things are required to KYC every wallet connecting to them, I don’t see how they survive. I also don’t see how that is enforced, but government could theoretically start fining and arresting anyone who deploys a DEX or DeFi smart contract,” he added.
Nonetheless, Lou Kerner noted that not all countries will take an intolerant approach to cryptocurrency, as the case of El Salvador highlights.
“In the long run, crypto is far bigger than any one country, or group of countries,” he said. “Countries that crackdown will see an exodus of talent, when able, as the builders seek to build in more regulatory friendly jurisdictions.”
Fawad Razaqzada also said that it would be hard to completely suppress the use of cryptocurrencies.
“I don’t think authorities will be able to completely restrict access for everyone, everywhere. It is clear governments are threatened by the rise of cryptos as an alternative form of payment that could eventually replace or at the very least complement fiat currencies.”