Friday, March 1

Cryptocurrencies in the spotlight

Cryptocurrencies in the spotlight

The beginning of 2022 has been very intense for global markets. It has been no less so for the cryptocurrency market, which has been experiencing significant price variations since the beginning and whose panorama became even more complicated with the outbreak of the war caused by the Russian invasion of Ukraine.

Even so, and although it is still far from the highs reached in November 2021, when the price of Bitcoin exceeded 68,000 dollars, the cryptocurrency seems to show signs of recovery and is at levels close to those marked at the beginning of the year.

Persecution of cryptocurrencies in China

One of the most relevant setbacks suffered by cryptocurrencies occurred after China prohibited and penalized any type of activity related to cryptocurrencies last year.

The mining company that operated in the Asian giant, and which was the largest at the international level, had to flee from the veto by looking for new places to carry out its work safely. The most attractive alternative to move to was Kazakhstan, both because of its geographical proximity to China and because it has benign policies with this industry.

However, the situation underwent a rapid and drastic turn of one hundred and eighty degrees when electricity cuts began to occur – largely responsible for the collapse of Bitcoin – and the Ministry of Energy blamed it on the miners, in addition to raising taxes. and refer to miners who did not register their business as criminals. The situation became increasingly difficult with the addition of internet outages, which ended up leading to a search for friendlier destinations where to carry out their mining operations.

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Airs of regulation

After the ups and downs suffered, the truth is that at the present time there is a lot of global interest in regulating cryptocurrencies in an effective way. Although this is not new, it is known that cryptocurrencies have been in the sights of regulators for some time. Especially when world-renowned companies begin to invest and accept payment in cryptocurrencies, demonstrating that a new reality is making its way into the world of finance.

It is therefore not surprising that both the European Union and the United States are making every effort to achieve this regulation as soon as possible, with the aim of, as they state, avoiding fraud and the financing of terrorism or criminal activities in general, as well as offering consensual and global regulation.

In fact, the European Union would be preparing a single regulation with the intention of regulating this market that would be included in the MICA Regulation and that it would try to provide certainty and legal clarity for the development of crypto assets, creating an adequate framework for their issuance while protecting investors and minimizing the risks for financial stability and monetary policy.

Haven value vs speculation

But should we consider cryptocurrencies as a safe bet?

A point of reflection regarding cryptocurrencies and that divides analysts is at the moment of considering Bitcoin as a refuge value -since it is known that in countries with high inflation there are many investors who bet on investing their capital in cryptocurrencies. – Or consider whether it would behave more than as a refuge asset, as a protector against geopolitical risk, similar to the role played by crude oil, which tends to collapse in scenarios of macroeconomic convulsion, but which increases in price when there is a conflict of political danger where there is perceived risk of shortage.

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Be that as it may, the reality is that at this time of armed conflict between Russia and Ukraine, US and European representatives claim that Russian oligarchs are trying to use crypto as a refuge for their fortunes by converting their rubles into cryptocurrencies in order to avoid sanctions. imposed. Thus giving an effective sample of considering cryptocurrencies as an adequate option to protect their assets.

But the decision to invest or not in cryptocurrencies should not be based on this single fact, since, in the opinion of some analysts, investing in cryptocurrencies would be something extremely risky due to its high volatility and its not so clear future utility.

Even so, the British Government recently announced its intention to accept the stable coins as a means of payment, as well as its interest in using decentralized database technologies, similar to those used by cryptocurrencies, seeking greater transparency and efficiency. A fact that could perhaps be interpreted as another point in favor of cryptocurrencies.

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