Cryptocurrencies continue to trade in the narrow range over the last week; Bitcoin traded in the range of $10,000, while Ethereum and Ripple are trading in the range of $870 and $0.92 – small trading range suggest that traders apprehensive about how cryptocurrencies will behave in the days to come.
Regulators slammed prices early in the year amid their strict stance towards cryptocurrencies – they criticized the surprise growth in prices of digital currencies and considered the rise of its use for illegal purposes.
Tether and a few other coins claimed to be back by U.S. dollars, yet they failed to prove this in audit reports.
The company’s website states: “Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD”.
Tether has dissolved their relationship with the Friedman LLP audit firm and hasn’t yet announced any new agreement for auditing their accounts in order to validate their claims. As a result, Commodity Futures Trading Commission issued subpoenas to Tether because of concerns over their balance sheet and pump and dump schemes. [1]
The Uptrend Could Be Based on Speculation
The research report suggests that almost half of bitcoin transactions are conducted for illegal purposes.[2]
The Australian Research Council said: “We find approximately one-quarter of Bitcoin users and one-half of Bitcoin transactions are associated with illegal activity. Around $72 billion of unlawful activity per year involves Bitcoin, which is close to the scale of the US and European markets for illegal drugs.”
The research reports suggest that the hype in bitcoin price was fueled by criminals, pump and dump schemes and other price manipulation activities. Bitcoin doesn’t have any underlying value other than the cost of mining a coin (which varies according to the electricity prices in different countries). [3]
Bulls are predicting a sustainable rally in prices and they believe regulating cryptocurrencies would improve market sentiments. It’s unquestionable that investor’s confidence can get a huge boost by regulating virtual currencies; the price of these currencies would decline substantially if regulators successfully barred criminals from crypto markets.
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References
- ^ issued subpoenas to Tether (www.reuters.com)
- ^ report suggests (www.businessinsider.com.au)
- ^ the cost of mining a coin (cryptocurrencynews.com)
