Cryptocurrencies Bounce from Two-Month Bottom Following Senate Hearings
Cryptocurrencies bounced back on Tuesday in a session marked by extreme price fluctuations, as the U.S. Senate rekindled a long-standing debate about the market’s regulatory future.
Altcoins Lead Broad Recovery
The cryptocurrency market whipsawed before turning higher in afternoon trade, with bitcoin and all major altcoins recovering. Bitcoin briefly fell below $6,000, reaching levels not seen since October when the market was in a major uptrend. The world’s biggest cryptocurrency recovered above $7,800, according to CoinMarketCap.
Altcoins also rose, with the likes of NEO, NEM and VeChain posting double-digit advances.
Earlier in the day, cryptos fell to their lowest level since November, with the combined market cap bottoming at around $276 billion. That represents a decline of $550 billion from last month’s historic peak. At press time, the total market was capitalized at $373 billion.
The full-month selloff has been stoked by regulatory fears, bank restrictions and controversy surrounding major crypto exchanges. Bitcoin’s meteoric fall has also had an over-sized impact on the market.
America’s top securities regulators descended on Capitol Hill Tuesday for a Senate Banking Committee hearing devoted to virtual currencies. After hearing testimony from the heads of the SEC and CFTC, Senate Banking Committee Chair Mike Crapo said regulators may need more power to control the market.
Under existing laws, U.S. cryptocurrency exchanges are regulated at the state level, falling outside the purview of the Commodity Futures Trading Commission. The Commission’s scope is currently confined to professional investors as opposed to retail traders, which limits its ability to regulate the digital currency sphere. For that to change, the CFTC would require new legislation.
Meanwhile, the Securities and Exchange Commission has devoted more resources to combating fraud and misrepresentation in the ICO market. On Tuesday, SEC head Jay Clayton reminded companies that calling their token a “utility” doesn’t automatically make it except from federal securities laws.
Although it is clear that regulators are concerned about cryptocurrencies, they explicitly said the market was not a systemic risk due to its relatively small size.
Many investors believe that the U.S. regulatory debate over cryptocurrency could influence the policies other nations adopt. Currently, policies governing cryptocurrencies diverge wildly across the globe. One only needs to turn to Asia for a case study. Cryptos are fully regulated as payment methods in Japan, but are strictly banned in neighboring China.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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