The past few weeks have demonstrated yet again just what the heck a rollercoaster ride the cryptocurrency world can be. We know there is a love-hate relationship between the traditional central governments and the decentralized blockchain system upon which cryptocurrency runs. While there is just one central government that has fully embraced the use of crypto, the majority of the governments around the world don’t encourage its use.
Crypto has been praised as the silver bullet to widen financial inclusion banking the unbanked. Solve issues around good governance and give individual citizens more leeway in terms of privacy, security, and being their own #Tech #startup #Bitcoin https://t.co/pGI5NngFmN
— Felix Omondi (@flexxmosh) November 15, 2021
The Crackdown on Cryptocurrencies
The previous week, the Central Bank of Russia proposed a ban on the use and mining of cryptocurrencies within Russian territory. The bank cited that the decentralized currency posed a threat to the financial stability of the country, its citizens, and the sovereignty of Russia’s monetary policy.
The bank also threw in the age-old spanner into the crypto-development cogwheel. Saying that crypto is a gaping hole in financial sector regulation that offers great leeway to money laundry. In addition to providing a great avenue for the financing of terrorism activities.
Russia’s ban on crypto is seen as the first wave in a series of world governments’ waves of imposing stricter regulation on cryptos. Russia wields a significant influence, given it is the third-largest country in terms of bitcoin mining. The first and second are the United States and Kazakhstan, respectively.
The bad situation could soon be compounded by the fact that Kazakhstan has seen several unrests since the start of the year. The general expectation in the country is that the government will impose stricter regulation leading to a mass exodus of bitcoin miners out of the country. China had imposed a complete ban on crypto much earlier, and most other Asian countries share the same view on cryptos.
The US has lately been experiencing a high inflation rate, and the Federal government has introduced various measures to arrest the situation. One of the monetary policies introduced by the Fed is stricter regulation on cryptos. Although in the US, crypto’s value has been moving in tandem with the stock market, which has been falling since the turn of the year.
As a survival mode, most investors across the US are now shading off high-risk assets like technology stocks; and cryptos rank pretty high in that list. The general expectation across the US is that the Federal Reserve is set to impose further stricter monetary policies to curb the rising inflation.
“It’s possible that macroeconomic concerns, such as the Fed’s response to inflation rates, have facilitated more de-risking activity in general. The recent price drop, coupled with high volatility, could be leading to further selling as participants look to reduce risk,” said Juthica Chou, the head of OTC options trading at Kraken.
The General Fall of Cryptocurrencies
It is undeniable that confidence in crypto has been somewhat shaky in the recent past. This can be seen from the general fall in the cryptocurrencies prices. For instance, bitcoin, as the leading crypto is sitting at 45% of its all-time high. The other leading crypto, ether, is sitting at 49% of its all-time high.
The price dip has not just affected the mainstream and popular cryptocurrencies. Even the alternative coins (alt-coins) have registered varying price dips to some extent. As can be gathered from the coin ranking history as cited by the CoinBeast website, you can conclude that many investors are trying to minimize their risks.
Diminishing Investors’ Confidence
There is a general feeling that world governments are collectively working towards introducing stringent measures to control cryptocurrencies. If or when that happens, the biggest appeal cryptos have – being decentralized – will be severely undermined.
If the central governments can have control over the development of cryptocurrencies, then the whole purpose of crypto would be defeated. Investors might as well settle for the traditional fiat currencies. However, if indeed there comes a point when central governments have substantial control over crypto. There is doubt they would encourage their use over the fiat currencies. If anything, they would copy-paste cryptos’ unique features over to the fiat currencies. Then try to bury the cryptocurrencies into oblivion.
************ Update ***********
Emerging news from Kremlin shows that Russian President Vladimir Putin and a section of the Russian government have a contrary opinion to the country’s Central Bank. As we indicated above, the Bank wants neither the trading in cryptocurrency nor its mining. The bank took drastic action and called for a total ban of the said two within the Russian territory.
However, it has since emerged that the Bank’s sentiments are not shared across the Russian government. News, emerging out of the country indicates that a section of the government does not want a total ban on either the trading in crypto or its mining. Instead, they’re pushing for more regulation and accountability, on top of levying a tax. President Putin seems to be rooting for the alternative route instead of a total ban of the crypto in the country.