Between Sunday evening and early Tuesday morning Bitcoin’s price dropped from over $9000 to below $6000. Writing on Wednesday afternoon it’s back at around $8350. Anyone who has been investing online in the cryptocurrency is on closest investing may ever come to an actual rollercoaster ride. Prices have now risen by around 26% over the past 24 hours having fallen by over 20% during the previous 24 hours. It’s moments like this that mean it’s not hard to see why so many banks are now moving to block cryptocurrency purchases using credit cards!
After moves by regulators in Asia, including China, South Korea and India, to ban or limit cryptocurrencies trading and use were attributed to the recent sharp drop in its value, yesterday’s rise also seemed to be closely linked to sentiment around regulation. At a Senate hearing yesterday, the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission expressed cautious optimism around the potential of blockchain technology and cryptocurrencies. The hearing was characterised by what many considered surprisingly measured and sophisticated dialogue on the topic.
The hearing was centred on how lawmakers in the U.S. should address the need for regulation of cryptocurrencies. Topics forming part of the discussion included market oversight, price volatility and ICOs (initial coin offerings). Both committee members and regulators demonstrated levels of understanding of the cryptocurrencies and blockchain topic that impressed many observers. Most felt that reading between the lines of the discussion, key takeaways could be sentiment that there is a need for a clearer regulatory framework around cryptocurrencies but that lawmakers and regulators both believe cryptocurrencies are not going anywhere.
One high profile economist, Nouriel Roubini, so known for his pessimism that he has been dubbed “Dr Doom” said on Tuesday that he expected the result of the Senate hearing to lead to Bitcoin’s price dropping below $5000 on its way down to zero. A week earlier Roubini commented on Bloomberg that he believed Bitcoin was the “biggest bubble in human history”. At least for now, it appears the result of the Senate hearing has been the opposite to what he predicted.
Only the bravest would make any predictions on where the price of Bitcoin and other major cryptocurrencies will go in the shorter term but for now the biggest single driver appears to be sentiment around regulation. This is considered key to the prospects of cryptocurrencies mainstreaming over coming years.
