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The Pandemic will Accelerate Crypto-Processes

While the entire planet plunges into self-isolation, New York becomes the “new Wuhan”, and leading central banks are trying to open up all available cranes to maintain liquidity, the crypto market froze in indecision.
Alexander Kuptsikevich
Golden bitcoins on the black background closeup. Cryptocurrency virtual money

Bitcoin has been trading for a few days at around $6,700, setting the tone for the entire sector. Remarkably, the recent sharp rebound of the stock market has not affected digital currencies in the same way.

The sideways under current conditions is quite good news for all market participants. If the trend reverses downwards, we will see a surge in demand for stablecoins again. Coin Metrics has calculated that at the moment of the highest market turbulence on March 13, stablecoins attracted a historical height of more than $400 million from other cryptocurrencies.

Nevertheless, too long sideways trend will remind the participants of the crypto market that more often than not, these trends are ending with decline.

What do the technical indicators say about this? The RSI index, which has broken out of the downtrend, indicates growth prospects. The Crypto Fear & Greed Index has been in the “extreme fear” area for a long time, which again shows a favourable growth outlook.

However, we are now at a point where market trends can quickly change due to pandemia. Constant analogies with the times of the Great Depression and panic in the market lead to the promise of unprecedented stimulus measures by the world’s leading central banks. The recent sharp growth in stock indices has eased the panic somewhat, but this may only be a short-term step towards a depression for the entire traditional financial market.

Against this backdrop, both the prospect of tight regulation of the crypto sector and purely “crypto-triggers”, including the upcoming halving, took a back seat. What will happen when smaller miners switch off their ASICs? We will be witnessing the continued centralization of the computing power of the Bitcoin network. Large players can use their firepower to buy the equipment from small miners and keep the network hash rate stable despite operating losses for some time. In the end, we will get a few owners of the Bitcoin hash rate, which will be “too big to ignore them”. That makes them target for regulators, whose victims were previously the Facebook and Telegram projects.

The attitude of the U.S. regulator to digital currencies can be seen in the litigation of the SEC and Telegram. The latter is desperately trying to appeal against the regulator’s decisions. Still, it seems very likely that the position will be principled to indicate the prospects for other participants of the crypto market. This year may become not only the control of people free movement but also a year of regulators and authorities attempt to get full control of money flows through crypto-flow limitations.

 by Alex Kuptsikevich, the FxPro senior financial analyst.

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