Bitcoin Bears and Regulations: Where Bitcoin is Headed for the Winter

October 8, 2019
“A successful man is one who can lay a firm foundation with the bricks that others throw at him”
― David Brinkley

5-Day Change

  • Bitcoin $8,206
  • Ethereum $181
  • S&P 500 2,938
  • Dow Jones 26,084

Bitcoin Bounces Back Above $8,000 and the Rally Ahead

It’s not $20,000, but it’s a Bitcoin dips below $8,000 for 24 hours before rising back to $8,000 – driven by a buy signal. There’s been a surge of Bitcoin optimism lately, despite the fall that’s seen the cryptocurrency go from a year-high peak of nearly $13,000. In fact, one reputed German bank claims that Bitcoin is on track to hit $90,000 next year.

What’s this about a buy signal? Well, Bitcoin’s flashed a buy according to the GTI Global Strength Indicator, meaning that Bitcoin’s volatility following the bear rally that took it from $10,000 may be tapering off.  

Is there anything else to look forward to? There’s the aforementioned German bank report – it draws direct comparisons between Bitcoin and gold, and points out that Bitcoin’s halving – where the supply of Bitcoin will be reduced by 50% – hasn’t been priced in yet.

Will the downtrend continue? It’s not out of the question, as one Bitcoin analyst notes that unlike 2017, when Bitcoin hit its all-time high of $20,000, the bull run leading up to this year’s high of $13,000 wasn’t supported by new money. If that is the case, then Bitcoin might keep dropping to the year’s end.

Wut We Think: Bitcoin is an inherently volatile asset – that’s what makes it interesting. Also, a canny trader can capitalize on any move, up or down, if they predicted it correctly. For Bitcoin, however, whether or not it’s on track to reach $ 90,000 next year – it never hurts to capitalize on cheap Bitcoins – just in case.


What the Regulators Think About Bitcoin

Bitcoin is not a security... at least according to a pretty emphatic letter by the United States Security and Exchanges Commission (SEC). That may seem strange because Bitcoin is clearly used as a financial asset that generates a profit. However, although it does generate profit, it still doesn’t pass the Howey test for securities.

What does that mean? For starters, it means that Bitcoin is exempt from some regulations that apply to securities. Specifically, it means that Bitcoin doesn’t have to comply with investor protection regulations that apply to securities.

So, is that a bad thing? Well, it depends on whom you talk to. The often unclear legal status of Bitcoin and other cryptocurrencies has kept some Bitcoin investment vehicles in the dust, such as the Bitcoin-backed ETF and Bitcoin investment funds. On the other hand, crypto-enthusiasts have a much freer hand to experiment without worrying about violating U.S. finance law – as long as they don’t stray into regulated financial instruments.

Is any clarity incoming? There may be something ahead that’s sure to perk everyone in the crypto space up – the upcoming October 13th deadline for a proposed Exchange Traded Fund (ETF). Add that to Bakkt’s recent launch, and Bitcoin may soon be gaining some regulatory clarity.

Wut We Think: Even with Bitcoin’s unclear status, institutional players are getting into the Bitcoin game, and they are bringing modern financial protections with them. There are now fully insured Bitcoin custodians, as well as major market makers and a regulated futures market.  Even if governments keep a light touch on the cryptocurrency, it seems the market is making Bitcoin more in-line with other financial instruments either way.

Trading Spotlight: Leverage

Leverage is a vital tool for a crypto trader. It allows them to magnify profits even with small initial capital investment. Trading with up to 50x leverage, for example, means that $1 can be used to buy $50 of Bitcoin – at the current price, that means a trader would only need to put up $165 to trade 1 BTC on the market. It also means that any price movement is similarly magnified.

Leverage: Financial leverage is the use of borrowed assets, financed by debt, to generate returns. In other words, leverage allows an investor to magnify their gains. Leverage is commonly used by firms and investors to increase their funds without having to raise new capital. In cryptocurrency, leverage lets traders take advantage of even small shifts in volatility. To learn more about how leverage works on the Monfex platform, check out our Monfex Trading Academy.

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