Mainstream Media Is Misinterpreting Bitcoin Regulation Again (This Time from India)
I went to sleep happy last night knowing I bought bitcoin on the cheap. The rationale was simple: bitcoin is testing year-to-date lows, and I believe it’ll hit $50,000 in the not-too-distant future. Although I cost average BTC regularly, I decided to buy with a greater sense of urgency now that the crypto market is getting pummeled (it also helped that, after many months, Coinbase finally increased my weekly buy limit to a still pathetic $1,000).
If only I had waited another 12 hours or so, that $1,000 could have got me a lot more of the good stuff.
Like many other North American traders, I woke up on Thursday to a sea of red – bitcoin, Ripple, Litecoin, etc. were all down sharply. The uniformity of the decline suggested that market participants were once again feeding off the news headlines.
Regulation and Its Discontents
Over the past few weeks, we’ve done our best to quell rumors that South Korea was going to ban bitcoin imminently. As we noted on several occasions, the South Koreans were considering a cocktail of measures to bring down speculative bets in the market, but by no means had they agreed to ban bitcoin entirely. In fact, we also argued that this strategy would prove difficult to implement. Not only is the legality of doing so under scrutiny, but it wouldn’t actually curb speculation as much as it would push domestic traders to offshore accounts (see China for a case study).
Lo and behold, South Korea has not banned bitcoin, has no plans of doing so and is actually looking to benefit from its tax stimulus.
On Thursday, India became the latest country to scrutinize crypto after Finance Minister Arun Jaitley acknowledged that bitcoin is not legal tender, and said that his government would do more to clamp down on illegal activities involving digital currency. The mainstream media apparently took this to mean that India is about to issue a hard ban on cryptocurrency.
Of course, that’s not what Jaitley said. This is what Jaitley said:
“The Government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system.”
How could this be interpreted as a witch hunt on crypto traders? And why would Jaitley threaten with a ban when bitcoin is already considered illegitimate by the government of India?
When it comes to mainstream media, I’m beginning to believe at least one of the following is true:
- It doesn’t know anything about cryptocurrency
- It is trying to bring down cryptocurrency
- It has a vested interest in suppressing real news
We already know the third bullet point is true in the broader sense. The balance of evidence over the past 12 months makes a strong case for nos 1 and 2 being true as well.
Bitcoin Dragged Lower
News of an “imminent ban” in a country that already considers bitcoin illegitimate sent bitcoin prices tumbling on Thursday. At its lowest, bitcoin breached $9,000 for the first time since November when prices were heading in the opposite direction.
The decline on Thursday came mere hours after bitcoin posted its biggest monthly percentage drop in three years. In terms of lost market cap, January was the worst month on record. More than $44 billion exited the cryptocurrency during the month, far worse than September’s $6.4 billion slide.
September was when China issued an all-out war on crypto, banning domestic exchanges and initial coin offerings (ICOs). The author believes that the meeting of Communist superstars in October was partly to blame for the ban. After all, the old guard still wants to convey its unrelenting commitment to central planning, and what better way to do so than to rein in a decentralized market before bringing it back in the future on your terms?
We have numerous examples of bitcoin being dragged through the mud on the perceived threat of regulation. Although this will likely continue in the future, investors are starting to get comfortable with the idea of regulatory frameworks. At the very least, it will foster a sense of confidence in the direction of the market. Although bitcoin doesn’t need government approval for legitimacy, guidance from the top will only strengthen its appeal among those who aren’t necessarily drawn to its philosophy, but still want to play the market.
To recap: India is not banning cryptocurrency – at least, not based on what the Finance Minister said.
Read the news carefully, and don’t be played.
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.
Featured image courtesy of Shutterstock.