Let me start off by saying that despite being a huge proponent of the Crypto/Blockchain movement I still believe there should be some kind of transparency so that an average investor doesn’t get swindled by the ICO scammers, hacker heists or inside jobs. The U.S. SEC (Securities & Exchange Commission) initiative in this regards to launch a fake ICO website to educate people on the scams out there is a commendable & correct approach. Having said that some of the follow-up actions taken up by the financial regulators (specially in U.S.) seem to suggest they want to clamp down on everything with an iron blanket rather than trying to address the core issues.
Not surprising to see this when you have the Tech, Investment & Corporate Financial world being influenced by the biggest crypto detractors, such as Bill Gates (“bitcoin kills people”), Jamie Dimon (“Who cares about bitcoin”) and Warren Buffet (“Rat poison squared”) who don’t see the potential of value of the decentralized currencies — not because there is none but because they can’t see one!
U.S. & Canadian Regulators have recently launched a joint initiative called #Cryptosweep to investigate fake ICOs. Currently there are about 70 cases being investigated & 40 such companies have been issued with cease-and-desist orders. Good to know that bad players are being weeded out but I hope it doesn’t end up being a blanket ban with no criteria to determine a legitimate project. The worrisome part is that things don’t end here. The U.S. Department of Justice has opened a ‘criminal probe’ into finding out whether the price of Bitcoin & Alt. coins is being manipulated by traders! This is little over the head for me. Here’s why:
First of all if the Regulators were so worried about price manipulation in the Cryptocurrencies they have chosen the wrong time to do so. Taking the case of Bitcoin whose price has fallen more than 60% from its peak reached last December & trading at its lowest level in 5 months, traders would want the price to sky-rocket rather than hitting rock bottom. The only players I see benefiting are the institutional investors who have been getting in on the Cryptos lately. I wonder what were Regulators thinking when the price of digital coins was climbing to the moon late last year. The only manipulation I see is from the big players who want to flush out the rest of the HODLers staying in the game, before taking up further favorable positions since they had lost the chance first time around.
Secondly even if the prices were being manipulated this happens in pretty much all the financial markets — take for example Stocks & Forex — moves in both of these are defined by the big players not the day traders, swing traders or ST traders. In fact in Forex if the retail traders’ sentiment is heavily in favor of one direction, the currency pair moves in the other direction since that’s where the big players have placed their bets on. So the retail traders are always at the receiving end.
And finally as they say if you can’t fight it join it — only in this case it’s like keep fighting it but come up with something similar as well. U.S. actually has three stable coins backed by fiat either in circulation or in the making (Tether, TrueCoin, USDCoin). Many other countries are also either debating this or actively pursuing the option of issuing their own digital currencies controlled by the financial institutions in one way or other. England, Japan & Sweden are some of the prime examples. Whether these digital replacements of the fiat will have the same functionality as the Cryptos remains to be seen. I intend to do another piece on these stable coins soon. In the mean time you can read my article on “Fedcoin” & “Cashless society” to get some insight into the e currencies being considered by Central banks.
Any feedback or comments are welcome.
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Originally published at www.datadriveninvestor.com on May 29, 2018.
Financial Regulators’ double edged sword against Cryptos was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.