The UK’s Financial Conduct Authority (FCA) spoke, the media reacted, the market yawned and the price of Bitcoin rose.
It’s a story of misreporting, and the market’s reaction underscores how little control the UK regulator or government has over a decentralized asset like Bitcoin.
Many news reports on Monday said the FCA had banned Binance Holdings, the world’s largest cryptocurrency exchange.
At its peak in the late 2010s, Chinese miners are believed to have produced 95 percent of the world’s bitcoin. Here a manager checks equipment at a Bitcoin mine near Kongyuxiang, Sichuan, China.
Paul Ratje / For the Washington Post via Getty Images
In fact, the regulator merely reminded the company to trade in derivatives.
“The only story here is that the initial coverage of it was misleading and created confusion for some retail users in the UK,” Jason Deane, bitcoin analyst at Quantum Economics in London, told Newsweek. “The FCA’s position has not changed, there are no new guidelines, and it has no material impact on the trading habits of anyone in the UK who can spot Binance and all other exchanges as they did before.”
The FCA told Binance to be sure it was not actively promoting regulated products such as futures, options and “Contracts for Difference” (CFD), an agreement between the buyer and seller that says that the buyer and seller the difference between the current value of an asset like Bitcoin and its value at the time of the deal.
“These derivatives were banned in the UK some time ago,” said Deane, “so this is a simple reformulation of the rules.”
It would be difficult, if not impossible, for the UK government or any other government to ban Bitcoin, he said.
“The network is truly global and completely decentralized so that even the most powerful governments in the world cannot interfere with it in any way,” said Deane. “However, governments can make it difficult to use or exchange by controlling entry and exit through the banking system, and some have tried. Even then, because moving Bitcoin between jurisdictions is so easy by design, it “has limited effect and can actually lead to an escape of capital from the jurisdiction seeking to ban it.”
Deane said many investors would welcome “measured, sensible legislation,” but that could cause difficulties for governments as it would likely be viewed as “legitimizing” cryptocurrencies at the state level and that, in theory at least, could weaken government power Monetary policy.
In January, the FCA warned that Bitcoin investors should be ready to lose all of their money. “Investing in crypto assets or related investments and lending generally involves taking very high risks with investors’ money,” the FCA said.
So far, government policies have ranged from China’s efforts to shut down Bitcoin mining operations to El Salvador’s adoption of crypto as legal tender.
Up to 75% of Bitcoin mining operations were in China. Closing the mining operation can temporarily disrupt the hash rate.
But all the miners need is an internet connection and cheap, reliable power to get back up and running in a new location. Some seem headed for the USA, Canada, Eastern Europe, Northern Europe, and Kazakhstan, China’s neighbor.
China is testing a digital version of the yuan. It’s unclear whether Beijing’s decision to curb mining will be detrimental in the long run.
Meanwhile, CME Group said the daily trading volume for Bitcoin futures averages 11,500 contracts per day since the start of the year, up 40% from 2020. The contracts represent the equivalent of 57,500 bitcoins.
Some investors use futures and options to hedge against wild bitcoin price movements. The Chicago Mercantile Exchange had introduced micro-bitcoin futures at one-tenth the value of a bitcoin to allow a wider range of traders to control price risk.
Billionaire Mircea Popescu, who claimed to own more than 1 million bitcoins, has reportedly drowned while swimming off the coast of Costa Rica.
In 2011 he tweeted: “Bitcoin is currently the most important project of mankind. That is all.”
Popescu, 41, was a Romanian citizen. The status of his estate and the bitcoin assets he held are still unclear. Failure to obtain the Popescu coins would reduce supply, and when demand is strong the price would increase.
In midday trading on Tuesday, Bitcoin changed hands at $ 36,147.90, up 3.99% over the past 24 hours and up 24.67% for the year. The 24-hour range is between $ 33,976.55 and $ 36,425.89. The all-time high is $ 64,829.14. The current market capitalization is $ 678.20 billion, reported CoinDesk.
S&P Global raised its economic forecast as the US continued to recover from the COVID-19 pandemic.
“We expect the US economy to experience a summer boom fueled by reduced virus fears, increased savings and a rise in wages,” S&P Global said in a report. Pictured is Beth Ann Bovino, Chief Economist at S&P Global.
“We expect the US economy to experience a summer boom fueled by reduced virus fears, increased savings and an increase in wages,” the Wall Street provider of independent market intelligence said in a report. “The spending data is already showing that the shopping cart is spinning from goods to services as people lose their quarantine blues.”
Air traffic increased but was still 25% below the 2019 average. S&P expects tourist traffic to increase during the holiday season, especially as the US approaches herd immunity.
On June 27, the Transport Security Administration screened 2,167,380 passengers at U.S. airports, 241.96% over the 633,810 screened the same day last year during the pandemic, but still 17.65% among the 2,632. 030 reviewed in 2019.
Airlines are betting on a recovery.
In March, the discounter Southwest Airlines ordered 100 Boeing 737 MAX 7 jets, the largest order for the aircraft since it took off in 2019.
However, inflation and the labor market remain concerns, S&P Global said.
The Federal Reserve, the country’s central bank, now expects consumer spending inflation to hit 3.4% this year and 3.3% next year, before declining to 2.1%. Your goal is 2%.
The Fed has called the rise in consumer prices “temporary” and affirmed that view with less conviction at its most recent meeting.
Chairman Jerome Powell underlined the need for “humility” in forecasting when speaking to the press after the last meeting of the Federal Open Market Committee.
S&P expects the first rate hike in 2023, not the previously forecast 2024.
“We assume that the key rate hike in the first quarter of 2023 will be one rate hike, the second in the third quarter and two more rate hikes in 2024,” said S&P.
The Fed cut rates to prop up the economy during the pandemic and kept them low to fuel the recovery. Low interest rates spurred home sales and consumer spending, but hurt small savers.
The economy created 559,000 jobs in May, but that wasn’t enough to meet demand. However, the workforce is still down 7.6 million, or 5%, from February 2020, the month before the pandemic broke and officials shut down the economy to contain the spread of COVID-19.
“There is still a long way to go,” said S&P Global. “If the economy continues at this current rate of job growth (540,000 average over the last three months), the US labor market would not recapture the 22.4 million jobs lost until mid-2022. But that average monthly pace would be difficult to sustain beyond the third quarter as the jobs that will become vacant as the economy reopens is the low hanging fruit. We don’t expect to reach the pre-pandemic milestone until the fourth quarter of 2022. “
A variant of the coronavirus could pick up later in the year, but it’s unlikely to see a long-lasting economic downturn severe enough to be viewed as a recession.
S&P Global has set the risk of a recession at 10-15% over the next 12 months, up from the January estimate of 20% -25% and close to the long-term “unconditional” risk average of 13%.
Government spending supported the recovery.
“Our May 2020 Infrastructure Report found that a $ 2.1 trillion infrastructure program, similar to the $ 2 trillion candidate proposed by Biden, could add an additional 5 if the economy was run wisely over a 10-year period That would add $ 7 trillion. 2.4 million jobs will be created by 2024, and the productivity boost would create more jobs later, “S&P said.