Forex Analysis & Reviews: 15.03.2022 - Bitcoin: Biden's Decree to...

15.03.2022 12:38 PM

Bitcoin: Biden's Decree to Regulate Cryptocurrency is a Double-Edged Sword

Last week, when it became known that U.S. President Joe Biden signed an executive order to study cryptocurrency by government departments, bitcoin rose.

However, despite seemingly positive developments for the industry, growth was lost the very next day. And now, several trading series in a row, the main cryptocurrency is consolidating in the area of $38,000 per coin, showing no enthusiasm for future regulation.

What is the matter and what is wrong with the mass recognition of the industry? We will deal with this below.

Cryptocurrency is not as simple as it seems

When Joe Biden ordered the authorities last Wednesday to look into the role of cryptocurrencies in future finance, Bitcoin jumped 9% and Ethereum jumped 8%.

Jack McDonald, CEO of Standard Custody, a digital asset custody solutions firm for institutional investors, explained the reaction by saying that the real importance of this executive order is that the President of the United States is talking about cryptocurrencies at all.

But the cryptocurrency remains complex, and so does its reaction. Analysts note that digital assets may still feel pressure from the effects of the Chinese ban and the risks of losing their own identity.

Regulation of the crypto industry is a double-edged sword

On the one hand, the prospect of recognition of cryptocurrencies at the highest level is a plus for this market. Some industry observers see this as a bullish sign for bitcoin. They note that the president's announcement could herald the imposition of regulations on cryptocurrencies in the U.S., which will attract much more institutional money from pension funds and insurance companies.

For example, Edmund Kulakowski, senior financial crime consultant at London-based software company Fenergo, believes that Biden's order could spell the end of the "wild west" era for cryptocurrency as we know it.

But there is another side to this medal. And it will be possible to fully understand it only with time.

Others in the industry say that quantitative hedge funds using arbitrage and quantity strategies tend to excel in more volatile and unstructured markets. They have already adapted to the current "wild" market.

And with it not yet clear how and when this market will mature, there is still time and opportunity for hedge funds to leverage ultra-low latency networks to capitalize on the volatile and highly liquid crypto markets.

Pitfalls of Biden's Executive Order

Right now, crypto market participants have little confidence in America's regulatory intentions. Biden gave federal agencies six months to develop recommendations on how best to proceed.

It is not clear now which of the regulators will be responsible for this industry. In addition, the question arises as to whether cryptocurrency should be considered as a security or as a commodity.

Potential regulators now include the Securities and Exchange Commission (SEC), which regulates stocks and tokens that are considered securities, and the Commodity Futures Trading Commission (CFTC), which oversees commodity and derivatives markets.

Global market impact

Nevertheless, experts believe that the actions of the United States will undoubtedly have a serious impact on the global crypto industry.

America remains the epicenter of the traditional financial system and could become the same epicenter for cryptocurrencies. According to PwC, 43% of the world's crypto hedge fund managers are currently based in the U.S. The country has also become a hub for bitcoin mining after China banned it last year.

And although it is still not completely clear how the new decree may affect the market, its prospects can be described in the words of experts from Standard Custody. They called Biden's order a "symbolic document."

"He did not come out and say it's fraud or bad actors doing bad things," he added. "Quite the contrary, there is an admission that digital assets have a place in the future, that this industry requires a thoughtful approach to regulation."