“Deep pullback + regulatory storm”, where should the crypto market go?

With the volatile market and continuous high pressure regulation, the crypto market is experiencing the most embarrassing and difficult period since “94” in 2017, and investors are thinking of heaven and hell.

"Deep pullback + regulatory storm", where should the crypto market go?

“2021 is a tougher year for retail investors.” Yu Bo, a double player in coin stocks, lamented that it’s really not easy to survive in this bloody and miserable market.

On March 26, Archegos Capital, a fund managed by Korean-born hedge fund manager Bill Hwang, blew up its highly leveraged stock holdings and was executed to sell a total of $19 billion, setting a record for the “largest single-day loss” by a single investor.

On April 18 and May 19, the crypto market took a collective dive amidst the extreme market conditions that saw bitcoin plunge over $10,000. According to the data of Contract Emperor, the amount of contracts bursting on the whole network reached $6.9 billion and $5.2 billion respectively on these two days, and hundreds of thousands of investors’ crypto assets were instantly wiped out.

As the saying goes, “Success is also a failure”, high leverage is not only a “ladder” for rapid wealth growth, but also a fatal bane for the collapse of the wealth building, and the blessing and the curse are often in a thought.

On May 20, Google Trends data showed that the number of global queries for “cryptocurrency” surpassed its 2017/2018 peak, soaring to an all-time high and heading for another all-time high.

On May 18, the China Internet Finance Association, the China Banking Association and the China Payment and Clearing Association jointly issued the “Announcement on Preventing the Risk of Speculation in Virtual Currency Trading”, prohibiting financial institutions belonging to the three associations from conducting business related to virtual currencies; on May 21, the Financial Stability Development Committee of the State Council held its fifty-first meeting, stating that it would strengthen the supervision of financial activities of platform companies, crack down on bitcoin mining and trading, and resolutely prevent the transmission of individual risks to the social sector.

Against this backdrop of high regulatory pressure and market volatility, the crypto market is experiencing its most awkward and difficult period since the “94” in 2017.

The crypto market is facing a new wave of regulation
On the surface, Bitcoin’s deep fall from around $59,500 to as low as $29,000 was triggered by Tesla CEO Elon Musk’s “backlash” based on Bitcoin’s lack of environmental protection and the expiration of Bitcoin options; secondly, the surge of cryptocurrencies, especially animal coins, and the high sentiment of new investors were important signals for a change in the market.

However, Yu Bo is not convinced. “This is determined by the game logic of the crypto market.” He believes that the crypto market has experienced an eight-month rally, with too many profit-taking orders and too much leverage, and the decline is a necessary step for the market to cleanse and consolidate. It was only under the influence of negative news at the regulatory level, such as the Fed’s interest rate meeting and the joint announcement of three domestic associations, that caused a panic plunge in the crypto market.

On May 19, the day of the crash, the Panic and Greed Index, a measure of current sentiment in the bitcoin market, turned to “extreme panic” levels not seen since April 2020. This is evident from a report by Norwegian analyst firm Arcane Research, which shows that the index now stands at 21, down from last week’s “greed” level of 73.

It is worth noting that investors are generally bearish on the market due to the release of strict domestic regulation and risk prevention signals of containment.

On May 18, the three associations jointly issued an announcement on preventing the risk of speculation in virtual currency trading, prohibiting financial institutions belonging to the three associations from carrying out business related to virtual currency.

Three Associations Jointly Issued “Announcement on Preventing the Risk of Speculation in Virtual Currency Trading

Xiao Za, a partner at Beijing Dacheng Law Firm and director of the China Banking Law Research Association, wrote an article pointing out that the announcement specifically mentions that no virtual currency services should be provided to customers “indirectly”, which shows that: firstly, it is a penetrating regulation, and the superficial articles do not affect the characterization; secondly, it is to prevent financial institutions from cooperating with other companies to conduct virtual currency business and prevent the misuse of licenses; thirdly, it is to increase the compliance obligations of members and screen the services involving currency.

She believes that the announcement issued by China’s three heavyweight associations to prevent the risk of speculation has severed the infrastructure for frequent transactions of virtual coins by domestic residents and played a positive guiding role in controlling mainland residents’ speculation in coins.

On May 21, the 51st meeting of the State Council’s Financial Stability Development Committee called for a “crackdown on bitcoin mining and trading practices.” 21st Century Business Herald quoted an industry insider as saying that there are multiple possible reasons for cracking down on bitcoin mining and trading practices, including preventing “hot money ” funds using bitcoin to enter and exit the country illegally, cleaning up the concept and scope of regulating digital currencies, and the carbon neutral trend of bitcoin mining being too power-hungry.

The 51st meeting of the State Council’s Financial Stability Development Committee called for a “crackdown on bitcoin mining and trading”

In addition, according to Wu said blockchain, in response to the news that “the Financial Committee cracked down on bitcoin mining and trading”, analysts pointed out that this is the first time the State Council level publicly and explicitly proposed to crack down on bitcoin mining, which may have a great impact on the Chinese mining industry, and the subsequent landing measures are yet to be seen. In addition, the meeting clearly proposed to crack down on trading behavior, but the focus on preventing social impact, the focus may first fall on illegal behavior against retail investors outside the circle.

In fact, from a global perspective, the United States, Japan, South Korea, Switzerland, Singapore and many other countries recognize and allow bitcoin trading, and China is one of the most active regions for bitcoin trading. Meanwhile, China has legally characterized bitcoin as a “specific virtual commodity” since 2013, and its Civil Code, which came into force this year, also recognizes the property attributes of bitcoin.

However, Xiao Za points out that although holding bitcoin is not illegal, the frequent trading of bitcoin and fiat currency seriously affects the economic management order, and the operation of non-mainstream digital currency also puts the property rights of the people at risk, so it is necessary to intervene in time to prevent the overheated speculation from causing the collapse of coin prices and triggering mass incidents.

Bitcoin mining may be subject to strong regulatory “crackdown”
Since the news of the State Council’s Financial Stability Development Commission “crackdown on bitcoin mining” came out, many people in the mining community expressed their shock, and some even thought that domestic mining farms were going to “cool off”.

As a result, the entire “mining community” was cautious and careful, and many mining companies reacted quickly.

On May 22nd, Jiang Zhuoer, the founder of B.TOP, said in a post on his Weibo: a. Although B.TOP has not received any regulatory request from the relevant departments, considering the latest regulatory spirit and the fact that B.TOP’s business in mainland China only accounts for a small share of its own mining, there is no need for B.TOP to continue to provide mining machine procurement services to the public in mainland China and take additional regulatory risks for this. Therefore, B.TOP decided to stop providing mining machine purchase service for customers in mainland China; 2. “B.TOP is responsible for safeguarding the interests of its customers, and B.TOP will introduce measures to ensure that its customers do not incur losses.

BitDeer’s official announcement also shows that recently, in order to actively cooperate with the regulatory spirit of relevant countries and regions and support the compliance development of the mining industry, BitDeer will be upgraded and adjusted, and from 22:00 GMT on May 26, 2021, BitDeer will block all IPs in mainland China to further ensure that the platform does not provide services to residents of mainland China.

At the same time, local governments have begun to take a hand in regulating bitcoin mining.

On May 25, the Inner Mongolia Development and Reform Commission drafted “Eight Measures of the Development and Reform Commission of Inner Mongolia Autonomous Region on Resolutely Combating and Punishing Virtual Currency “Mining” (Draft for Comments)”.

May 27 news, the National Energy Administration Sichuan Regulatory Office issued a notice on the convening of a research forum on the situation of virtual currency mining. The notice said, according to the National Energy Administration requirements, in order to fully understand the situation related to virtual currency mining in Sichuan, my office decided to organize a research forum, will be held on June 2, 2021, 9:30-11:30. The participants include power grid enterprises, trading centers and power sales companies in charge. About the specific meeting content, State Grid Sichuan Electric Power Company, Sichuan Energy Investment Group will return their respective supply area virtual currency mining situation and related recommendations, shutdown virtual currency mining on the impact of this year’s Sichuan abandoned hydropower analysis; Sichuan Power Trading Center returns hydropower consumption demonstration area within the big data enterprises to participate in market transactions and related recommendations; power sales companies report agent big data enterprises Participation in market transactions and related proposals.

In this regard, Jiang Zhuoer said on his microblog, at present many cryptocurrency mining areas, such as northwest and southwest, local debt and abandoned power is very serious, bitcoin mining for the poor areas of finance, employment, residents income, etc. are not small help, but also help new energy facilities to gain revenue and further expand the scale. It is believed that similar rational analysis and research will be continuously fed by various industry players through various channels.

According to the Securities Daily, for the meeting of the State Council’s Financial Stability Development Committee, which called for a crackdown on bitcoin mining and trading, Ding Feipeng, director of the criminal department of Beijing Shangguang Law Firm, said this will certainly have a profound impact on the ecology of the virtual coin industry. He believes that after domestic mining is completely banned, miners will face the pressure of transformation or domestic sales to export, and some model coin miners may face the risk of closure or user rights, and there may be a new round of “outbound tide” of mining farms.

Exchanges are under pressure and under suspicion
Within a week, the crypto market has been hit hard by the three major financial industry associations and the Financial Stability Development Commission of the State Council, and exchanges have become a key target in the crackdown on bitcoin trading.

Recently, a media report said that from the screenshot of the chat between users and Firecoin customer service, “At present, Firecoin contract does not support Chinese users to open an account, and users who previously passed the certification of Firecoin account but did not open a contract account can not open a contract account now.” At the same time, Firecoin responded that because of the high volatility of the market, in order to protect the interests of investors, new users from some countries and regions are temporarily not able to open contracts, leverage, ETP and other services.

In addition, according to Bybit’s official announcement, Bybit will restrict mainland China IP addresses from accessing the API interface for quotes as well as account asset inquiries and order placement operations, including third-party trading tools, starting at 16:00 GMT on June 15, 2021.

From the response of the exchanges, all have suspended or restricted some trading services for mainland Chinese users.

Analysts believe that from the current round of regulatory tide is mainly to the December 2013 People’s Bank of China and other five ministries issued by the “notice on the prevention of bitcoin risk” again to reiterate and emphasize, and no new content.

Sun Jun lawyer interpretation, from the three financial industry associations issued the announcement content, first, the correct understanding of virtual currency and related business activities of the essential properties, virtual currency is a commodity, can not be used as legal tender circulation; second, the relevant institutions shall not carry out business related to virtual currency, Internet platform enterprise member units shall not provide network business premises, commercial display, marketing and publicity for virtual currency-related business activities, paid backflow activities; third, consumers should raise awareness of risk prevention, beware of property and rights and interests loss; fourth, strengthen the self-regulatory management of member units, or will be punished accordingly.

Ding Feipeng said the State Council’s Financial Stability Development Committee has called for a “crackdown on bitcoin mining and trading”, which will have a profound impact on the ecology of the virtual coin industry. He believes that token issuance and financing in the name of mining may be completely stopped, and clues of suspected illegal fund raising, illegal issuance of securities or illegal sale of tokens and vouchers may be transferred to judicial authorities. At the same time, the contract trading of virtual coin trading platform, I am afraid, can not continue to run, and even do not exclude the possibility of being further pursued.

In short, under the current high regulatory pressure, exchanges are on thin ice and dare not slacken off.

In contrast, the United States is trying to achieve better regulatory purposes by regulating crypto asset exchanges.

Recently, SEC Chairman Gary Gensler told Democratic Congressman Mike Quigley that there are many crypto tokens that meet the requirements of the securities laws and our agencies are working to enforce the law. However, there are currently thousands of tokens and we are currently only able to enforce 75 actions.

Gary Gensler wrote in his prepared testimony that the SEC has been consistent in its communications with market participants and that those who raise money with ICOs or engage in securities transactions must comply with federal securities laws. At the same time, he reiterated his intention to work with Congress to regulate exchanges. gary Gensler said that in recent weeks, daily trading volumes have ranged from $130 billion to $330 billion. However, because the tokens are traded on unregistered cryptoasset exchanges, the numbers are not audited or reported to regulators. This is just one of many regulatory gaps in these cryptoasset markets.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/deep-pullback-regulatory-storm-where-should-the-crypto-market-go/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-05-30 19:40
Next 2021-05-30 21:09

Related articles