After the plunge, the cryptocurrency world has been hit by another “storm”.
On the afternoon of April 18, Reuters reported that the Indian government will ban cryptocurrencies and impose fines on those who trade or even hold such assets in the country. India will define any behavior regarding crypto assets as a crime.
That very morning, digital currencies collectively suffered a bloodbath, with bitcoin once falling below $52,000 per coin, down more than 15% at one point during the day. Ethereum, Ripple, EOS and other digital currencies plunged across the board. According to Bitcoin Home data, there was nearly $4.5 billion blowout that day, which translates to about 30 billion yuan.
Perhaps the main reason for the avalanche of digital currencies that day was the regulatory attitude of governments. It’s not just India that’s going after digital currencies, as Turkey will impose a ban on crypto payments starting April 30, and Morocco is expected to introduce similar regulatory policies. In addition, news that the U.S. Treasury Department will charge a number of financial institutions with using cryptocurrencies for money laundering has heated up expectations of tighter regulation.
On the evening of April 18, when talking about the regulation of cryptocurrencies, Li Bo, deputy governor of China’s central bank, said that it is important to ensure that speculation on such assets does not cause serious financial risks, which is a must, and is studying the rules for the regulation of bitcoin and stablecoin. In the future, any stablecoin that wishes to become a widely used payment instrument must be subject to strict regulation, just like banks or quasi-banks financial institutions are as strictly regulated.
So, is mankind’s most resilient “bubble” about to cool off?
India steps in: Ban cryptocurrencies!
The biggest potential risk to digital currencies: government regulation, seems to be on the horizon.
The Indian government will ban cryptocurrencies and impose fines on those who trade or even hold such assets in the country, Reuters reported on April 18. An Indian government official said the bill is one of the world’s strictest policies against cryptocurrencies, and that it would criminalize the possession, issuance, mining, trading and transfer of crypto assets.
The bill was actually in the works a month ago when a senior Indian government official said India would propose a law to ban cryptocurrencies and would give cryptocurrency holders six months to liquidate such assets. With Prime Minister Narendra Modi’s government holding a majority of seats in parliament, officials are confident the bill will pass.
Judging from the latest report from Reuters, the bill may be about to take hold and cryptocurrencies will face the toughest legal regulation in India.
It is reported that India currently has about $1.4 billion (about Rs. 9.17 billion) in cryptocurrency investments, with the number of registrations and trading funds growing nearly 30 times in the past year. An Indian government working group had recommended in 2019 a prison sentence of up to 10 years for those who mine, generate, hold, sell, transfer, dispose, issue or trade in cryptocurrencies.
Digital currencies may face a new round of regulatory storms, judging from the latest global government trends. Turkey’s Central Bank said in the Official Gazette that cryptocurrencies and other digital assets based on distributed ledger technology, which cannot be used directly or indirectly to pay for goods and services, will officially come into effect on April 30. Currently, Turkey’s largest cryptocurrency exchange, BtcTurk, has more than 1 million users trading on the platform.
In addition, the U.S. Treasury Department will charge several financial institutions with using cryptocurrencies for money laundering. Prior to this, both U.S. Treasury Secretary Yellen and Federal Reserve Chairman Powell expressed negative opinions about digital currencies. Powell made it clear that cryptocurrencies are not backed by value, that crypto assets are highly volatile and speculative, and that global stablecoins are not currently regulated and do not serve as a substitute for the U.S. dollar.
Barron’s commented that most governments do not want unregulated digital tokens to seize monetary policy or financial regulatory dominance, and that the use of bitcoin for money laundering and tax evasion currently abounds, and some governments are bound to take action against it.
In addition, the former governor of China’s central bank, Zhou Xiaochuan, also took a stance on bitcoin on the evening of the 18th, regardless of whether it is a digital currency or a digital asset, it has to serve the real. What are the benefits of digital assets to the real economy? People now hold a cautious attitude towards this question. “We have experienced the global financial crisis in 2008 and found that finance is detached from the real, such as shadow banking, derivatives these have become purely speculative transactions between financial institutions, there is no connection with the real anymore, it is easy to go wrong.” Zhou Xiaochuan said to distinguish between digital currencies and digital assets, for digital assets such as bitcoin, not now to draw conclusions, but “to remind, to be careful.”
Bitcoin Flash Crash Plunges 15%, 500,000 People Explode $40 Billion
The digital currency has been scared to death before the regulatory storm came.
On the morning of April 18 Beijing time, digital currencies led by bitcoin collectively staged a flash crash market. Among them, bitcoin once fell below $52,000 per piece, the intra-day drop was once over 15%, and the turnover amount in the past 24 hours was close to $100 billion.
At the same time, other digital currencies also fell across the board, with ethereum plunging over 14%, ripple plunging 23.8%, litecoin plunging nearly 18%, and EOS plunging 23.45% based on 24-hour losses.
The digital currency collective collapse type plunge under the leverage to do more cryptocurrency investors lost a lot of money. According to Bitcoin Homes data, within one hour of the flash crash at 11:00 on April 18, the blowout amount was close to 30 billion RMB. As of this writing, close to 500,000 people have exploded their positions in the past 24 hours, with the total amount of exploding positions exceeding 40 billion yuan.
In the face of such an extreme market, the excessive amount of forced closures in a short period of time directly triggered a crash in the trading system. 18 midday, some investors reported that the quotation platforms had data misfits ranging from $51,000-56,000, and the exchanges began to lag and go down.
On April 18 #Bitcoin fell below $52,000 and was once on the hot seat. On social media, some cryptocurrency investors said, “It’s too bloody, run”, while others were more enthusiastic about bottoming out. usdt has now risen to $7 on some platforms, while the RMB/USD mid-price is only 6.5, which means a lot of bottoming out money is on its way.
It is worth noting that popular digital currencies such as Bitcoin, Ether, EOS and Ada coin had also killed across the board on April 4. But after that, digital currencies were once again on a high. So, will it be a repeat this time?
The world’s most bullish asset to cool?
In fact, before this round of plunges, bitcoin was the world’s most bullish asset in recent years. on April 14, bitcoin prices once soared to $64,374 per piece (about RMB 422,000), up as much as 50% at one point during the year. If you stretch the time period, Bitcoin’s rise is even more impressive. At the beginning of 2019, Bitcoin’s price was only $3,501 per piece, meaning that in just over 2 years, Bitcoin’s cumulative increase was as high as 1,739%.
If we calculate the highest price of bitcoin at $64,374, the total market value of bitcoin once exceeded 1.2 trillion yuan, which is about RMB 7.82 trillion yuan, more than the sum of the market value of 3 Maotai, and ranked 6th in the total market value of global listed companies, second only to Apple, Microsoft, Saudi Aramco, Amazon and Google, and more than the market value of FACEBOOK, Tencent, Tesla, Alibaba and other companies.
Tesla purchased $1.5 billion of bitcoin at a cost of $35,000, and if it had been held, its books would have been more than over $1.2 billion (about 7.9 billion yuan) in profit at one point.
On the surface, the April 18 plunge appears to be just a broken blip in the bitcoin bull market frenzy, with a large number of lucrative investors choosing to stop their profits and leave the market amid policy uncertainty. But in reality, the potential regulatory storm from global governments has to be taken seriously.
The latest report released by Citi states bluntly that for cryptocurrencies, changes in regulatory policy are the biggest risk. If regulation tightens, some speculative funds will return to the gold market.
In addition, another major potential risk facing digital currencies, mainly Bitcoin, is that the Federal Reserve will contract monetary policy and recycle liquidity, at which point global assets will face a phase of bubble squeezing. Until then, the most important driver of the bitcoin bull market is the Fed’s epic watering down, and the bitcoin bull market will also face a great test once monetary liquidity turns marginal.
But with the bullish belief in bitcoin, there are still plenty of people who are firmly on the long side. William, chief researcher at OKEx Research Institute, a leading digital asset trading platform, pointed out that bitcoin itself is a high-risk emerging asset with high price volatility and frequent price spikes and drops. In fact, this plunge in bitcoin prices can be seen as a bull market in a sub-trend.
Goldman Sachs (Goldman Sachs) said in its first-quarter earnings release on April 14 local time that market demand for crypto assets (virtual currencies) is still high, and while virtual currencies such as bitcoin are being explored as a way to store value and their trajectory is still unclear, customers are using virtual currency services and demand for cryptocurrencies is growing.
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