Bitcoin price has been falling since November 2021, as investors fret about its potential to
crash. At the time of writing, the cryptocurrency is down 45% from its November 2021 high.
However, this bearish move might be an anomaly – it could be due to a number of factors.
These include the regulatory environment and the correlation between bitcoin prices and the
traditional markets. But there is one thing that is clear: the cryptocurrency is still highly
volatile.
Regulation of
Despite the nascent cryptocurrency industry, the U.S. central bank is considering introducing
its own digital currency. This would be similar to electronic cash, except backed by a central
bank. In response to surging inflation, the U.S. central bank is considering aggressive
monetary tightening. However, lower interest rates have a beneficial impact on high-growth
sectors.
Despite this looming threat, cryptocurrency investors have begun dumping their holdings in
response to the report. Bitcoin has plunged from nearly $68,000 in November to the current
price just above $37,000. That’s almost half of the price of the cryptocurrency, which has fallen
by more than 50% from its all-time high of nearly $69,000 in November. But despite the
market’s recent gloom, investors should not lose heart yet.
Despite a drop in the price on Friday, the cryptocurrency has regained some ground, climbing
back above $35,000 by early morning Monday. Although it has fallen from its previous high of
over $70,000, this drop comes on the heels of a tech-heavy late-day stock market decline on
Thursday. Since the start of the year, the two markets have fallen in tandem, as investor
worries about interest rate hikes have spooked investors.
The drop in the bitcoin dollar value matched the 20% fall in Netflix shares. The share price
plunge wiped out more than $40 billion in market capitalization. In addition to this, Netflix’s
forecasted number of subscribers will drop. Analysts are concerned that a widespread
adoption of cryptocurrencies could make it more susceptible to market selloffs. On Friday, the
drop in the dollar value of bitcoin correlated with a 20% plunge in Netflix shares.
Regulation of digital assets
The wild volatility in the bitcoin price has drawn Washington’s attention and intensified
questions about regulation. While the bitcoin industry has a legion of lobbyists and advocates,
there are still a number of uncertainties surrounding the future of bitcoin. In this article, we’ll
take a look at the current landscape of bitcoin regulation and what to expect next. But in the
meantime, we’ll take a closer look at the most critical aspects of that regulation.
The Swiss are putting their regulatory framework in place to ensure that investors can trade in
digital assets. The Swiss have approved the first regulated central securities depository for
digital assets, the Six Digital Exchange. The Swiss market is developing rapidly, with more
players entering the space. The Swiss have the most sophisticated regulatory framework and
growing number of players, and they’re also setting the pace when it comes to allowing
investors to access digital assets.
While the report was welcomed by advocates of greater regulatory certainty, it has triggered a
massive selloff among traders. As a result, Bitcoin has dropped nearly 50% in price, from more
than $68,000 to just under $37,000. While this decline may be a temporary phase, it should
continue. The price of Bitcoin will likely continue to be correlated with other assets and will
likely fall in the coming months.
As the stock market declines, so will the bitcoin price. It has fallen since its November high of
nearly $70,000, falling to around $35,000 by the end of last week. As a result, the Federal
Reserve’s decision to withdraw emergency support has frightened investors who piled into
risky assets during the “pandemic.” Another cryptocurrency to suffer from the fall, Ethereum,
has dropped about 15% over the past 24 hours and 35 percent since the start of the year.
Regulation of crypto
Regulatory frameworks for the crypto asset industry should be tailored to the principal use
cases. For example, services providing investments should be regulated as securities brokers,
and payments should have requirements similar to those of bank deposits. In addition,
authorities should determine the suitability of investors and impose risk assessment
requirements. Central banks and banking regulators should have primary oversight over crypto
asset services. Nevertheless, there are several challenges associated with the current
regulatory framework for crypto assets.
The objectives of crypto regulatory schemes are similar to those of financial markets in other
sectors. The goals of such regulatory schemes include combatting the use of funds for illegal
activities, protecting investors and consumers from fraud, and ensuring the integrity of markets
and payment systems. The regulatory framework should also include a unified approach to
addressing the potential for regulatory arbitrage. To ensure that investors, consumers, and
financial institutions are protected, regulatory authorities should use a variety of tools.
Banks have expressed interest in cryptocurrency regulation, with 41% agreeing that more
clarity on crypto regulations will make the industry more attractive to banks. Banks will be able
to tap into the growing crypto market, reduce risks, and compete with fintech in the process.
Ultimately, a unified framework for crypto regulation will improve banking’s reputation and
increase profits. Further, the bill may also create new financial institutions and help regulate
them. Ultimately, lawmakers will need to work out a plan for regulating the crypto industry and
implementing it in the U.S.
In addition to the proposed new guidelines, the DFSA is requesting that existing firms with a
trading license in the crypto-token space contact it. They will also need to consider whether or
not updated requirements proposed by the UK Financial Conduct Authority will be relevant.
The UK Financial Conduct Authority recently proposed new requirements for marketing
cryptocurrency assets, including the provision that retail clients are not given incentives.
Further, the DFSA is also proposing that firms offering crypto-token services must conduct
anti-money laundering risk assessments.
Correlation of bitcoin price with traditional markets
A recent sell-off in Bitcoin’s price has led many to wonder if the coin will break away from its
correlation with traditional markets. But, it is a speculative question, and no one can tell you
for sure. The sell-off is a single data point, and veteran market watchers caution against
drawing conclusions based on one day’s price action. While it may be a valid question, the
answer to it depends on a number of factors.
While Bitcoin and stock market prices traditionally trade uncorrelated, this correlation has
increased over the past three years. The correlation between Bitcoin and the S&P 500 is
0.33%, one of the highest readings this year. As the crypto market matures, however, it is
becoming a more traditional asset. News about regulatory changes in traditional markets and
global events can impact Bitcoin’s price. In a recent analysis, Coinmetrics found a 0.36
correlation between Bitcoin and the MSCI Emerging Markets Index, a sign that a stronger bond
between the two will emerge.
The growing correlation between Bitcoin and traditional markets is not entirely surprising. For
instance, over the past year, bitcoin has traded in near lock-step with Nasdaq 100 futures,
which represent sentiment toward the technology giants. This correlation has increased
significantly since 2020, with higher levels in future years as Bitcoin gains popularity among
investors. It is not a coincidence that institutional investors are moving into digital finance.
Although little-known cryptocurrencies will continue to trade uncorrelated with other assets,
the more established ones will likely trade with traditional markets.
However, a recent report by SFOX, a cryptocurrency trading platform, highlights the
importance of analyzing Bitcoin’s sensitivity to traditional markets. Considering the Federal
Reserve’s aggressive tightening plans, the cryptocurrency market’s sensitivity to traditional
markets may tip the U.S. economy into recession. In fact, the 90-day correlation between
bitcoin and the S&P 500 index jumped to 0.49% on Friday, its highest level since October
2020.
Impact of regulatory changes on bitcoin price
Whether Bitcoin is regulated remains to be seen, but there are many signs that regulators are
gathering data. Bitcoin prices will most certainly be affected if the US government decides to
crack down on cryptocurrencies. Regulators have already met with representatives of the
Bitcoin Foundation and other companies to create a framework for bitcoin regulation.
Meanwhile, Tradehill has suspended operations because of the unclear regulatory situation.
But the uncertainty surrounding regulatory issues has not dampened the volume of trading,
with bitcoin price trending upwards over the past month.
In order to evaluate the impact of regulatory news on bitcoin prices, we first identify the types
of events that might impact the bitcoin price. Then, we examine how these regulatory changes
will affect other cryptocurrencies and aspects of the Bitcoin market. Because cryptocurrency
prices are forward-looking, they often reflect the effects of corporate actions. We’ll discuss
each type of event in turn. For example, China’s recent hints at regulating the bitcoin market
caused massive shifts in bitcoin trading to Asian currencies.
The goals of cryptocurrency regulation are similar to those for other financial assets and
services. Ultimately, they are to protect consumers and prevent fraud and safeguard the
integrity of the markets and payment systems. And regulators can accomplish these goals by
implementing a variety of tools. While there’s a significant amount of uncertainty, the following
is a brief overview of how regulations may impact bitcoin’s price. So, what are the steps that
regulators can take to protect consumers and investors?
While regulators may be hesitant to regulate cryptocurrencies, they must be aware that the
impact is on the global cryptocurrency market. The news about potential regulations can affect
both the bitcoin price and the market’s valuation. To be effective, regulators must identify how
they will regulate cryptocurrency and what their specific role is. This is particularly true for
news about general bans on cryptocurrencies, securities law, and money laundering and
financing terrorism.
