- Bitcoin prices saw a 9% drop on Wednesday, with Brexit and regulatory scrutiny listed as potential causes.
- Mark Zuckerberg defended Facebook’s Libra token in a hearing with Congress.
- According to one industry expert, increasing Bitcoin’s privacy is key to its long-term success.
After spending much of the year in an upswing, Bitcoin prices plunged to $7,435.26 this week. This marks BTC’s lowest value since June. This is the latest setback in a series of stumbles for the world’s most popular cryptocurrency; some investors speculate that increased scrutiny from regulatory bodies has had a negative effect on BTC’s exchange rates.
In this case, the 9% drop coincided with Facebook CEO Mark Zuckerberg’s testimony before Congress, which took place on October 23. While there is a clear correlation between Bitcoin’s dropoff and Zuckerberg’s appearance in Washington, there may be another major factor to consider: the UK’s increasingly tumultuous Brexit situation.
Brian Kelly, CEO of BKCM, told CNBC that other factors were contributing to the sell-off. Macro hedge funds were buying bitcoin as a hedge to Brexit, which is looking less likely in the near future. As a result, those funds are now selling, Kelly said. Bitcoin miners, who use high-powered and expensive computers to create bitcoin, have a “break even” price of between $7,900 and $7,500 — any dip below that causes them to sell, he said.
Zuckerberg’s testimony is a “secondary effect,” according to Kelly.
“Buyers are reluctant to step up before they hear the Q&A,” Kelly said.
Though Facebook’s Libra cryptocurrency isn’t expected to hit the market until 2020, it’s already faced scrutiny from regulatory bodies. This week, CEO Mark Zuckerberg appeared before Congress to address its growing concerns about privacy issues, spreading of misinformation, and — of course — Libra itself.
Zuckerberg admitted that the token was “risky,” which has led early investors like Visa, MasterCard, and Paypal to jump ship. However, as he reminded the group, there is a need to innovate to compete with other global markets, which requires a bit of risk-taking. “While we debate these issues, the rest of the world isn’t waiting,” he said. “China is moving quickly to launch similar ideas in the coming months.”
His China argument found a ready echo from some Republicans on the committee, such as Rep. Patrick McHenry of North Carolina, who stepped up to defend the Libra project and urge lawmakers not to put “innovation on trial.”
But Democrats, in a rare tilt, allied themselves with President Donald Trump and his Treasury secretary, Steven Mnuchin, who have publicly criticized the Libra plan. Mnuchin and other regulators, including Federal Reserve Chairman Jerome Powell, have warned that the digital currency could be used for illicit activity such as money laundering or drug trafficking.
Zuckerberg touted his optimistic vision of Libra and what it could mean for people around the world who don’t have access to bank accounts.
We know crypto tokens like Bitcoin have advantages that traditional financial institutions can’t offer, particularly its decentralized nature. However, Bitcoin and other cryptocurrencies have been plagued by doubts about their safety, particularly concerning token holders’ privacy. According to Kevin Pan, CEO of one of the world’s biggest Bitcoin mining pools, BTC needs to enhance its privacy options to avoid the scrutiny of regulatory bodies, which regularly throw the industry into turmoil.
As Pan told Bitcoin Magazine, “There is no other big question if the privacy issue is solved.” In other words, “if there is privacy, you can’t know who the address belongs to, and you can’t determine how much the amount is, and there is no way to control the currency system. So for me, Bitcoin is basically no problem if the issue of privacy can be solved.”
This issue raised by Pan is closely related to the issue of Bitcoin mining centralization, as this sort of censorship attack is only possible if government officials are able to identify and coerce 51% of the network hashrate. Progress is also being made on this greater issue of mining centralization. New mining protocols can further decentralize the transaction selection process, and more mining centers, such as the ones recently revealed by Bitcoin technology startup Blockstream, are popping up in jurisdictions other than China.
Transaction censorship is also easy to enforce via centralized services built on top of the Bitcoin network, such as exchanges, where the vast majority of Bitcoin activity takes place.
Taproot, which is an in-development improvement for Bitcoin, is expected to enable vast improvements to the current level of privacy offered to the cryptocurrency’s users. For now, there are wallets like Wasabi Wallet and Samourai Wallet available for those who desire a higher degree of privacy.
That’s the roundup for October 26th. Check in next week for the latest news of cryptocurrency innovation and regulation around the world!
Stay up to date on cryptocurrencies like Bitcoin, Ethereum, Litecoin, and more! Click below to subscribe to our monthly newsletter.
Disclaimer: The material and information contained in this article is for general information purposes only, and no part of this article should be construed as professional financial or investment advice. Whilst we endeavor to keep the information up to date and correct, OKCoin makes no representations or warranties, express or implied, as to the completeness and accuracy of the information presented in this article. You should not rely upon the material or information in the article as a basis for making any business, legal or any other decisions.