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The plunge triggered by a tweet: the panic in the market urgently needs the "strong medicine" of compliance



On April 18, a tweet stated that the U.S. Department of the Treasury would accuse a number of financial institutions of using digital currency for money laundering. The reappearance of regulatory shadows triggered market panic about regulation. Bitcoin fell to $52,000 per coin in a short period of time. With a drop of more than 17%, the topic "Bitcoin fell below $52,000" rushed to the Weibo hot search-zce list.

At the same time, a number of mainstream currencies "followed the trend" and plummeted: Ethereum, Binance Coin, Ripple Coin, Litecoin, TRON and other digital currencies also plummeted. According to statistics, this incident triggered more than 470,000 investors to liquidate their positions.

A Tweet Causes Panic

The reason for the collective plunge in the currency circle this time may be due to a tweet.

"The U.S. Department of the Treasury will accuse a number of financial institutions of using digital currency to launder money, and one of them is Credit Suisse, which was hit hard in the "Century Explosion." A piece of news that is difficult to distinguish between true and false comes from a popular Twitter account FXHedge, which sent out an alert to a total of 122,700 followers.

Argentine President: El Salvador Making Bitcoin a Fiat Currency May Be a Good Path: Argentine President Alberto Fernandez Shows Openness to Bitcoin in Interview with In response to whether he would follow El Salvador's lead in making bitcoin a legal tender, he said: "I don't want to go too far, but there's no reason to say no, maybe it's a good way to go. Substantially remove the inflationary effect." But the president also said: "This is a global discussion, and I must admit that this is a topic that needs to be treated with caution. Many people in the world have concerns, which is why this project or system has not yet been adopted. But it’s something to consider.” Earlier this week, Argentina’s central bank governor, Miguel Pesce, said he believed bitcoin “is not a real financial asset that will generate lasting profitability.” (Decrypt) [2021/8/13 1:52:22]

Markets began to tumble within minutes of the tweet citing an anonymous source that quickly went viral.

Qihoo 360 released an advertisement about Bitcoin: Qihoo 360 released an advertisement about Bitcoin, claiming that if its anti-virus software cannot prevent blackmail from hackers, Qihoo 360 will pay up to 3BTC. [2021/5/6 21:29:14]

The U.S. Treasury Department declined to comment, and its Financial Crimes Enforcement Agency further responded in an email saying that it "does not comment on possible investigations, whether or not there are investigations."

And last week, the Turkish central bank banned the use of digital currencies and digital assets for purchases, citing possible "irreparable" damage and transaction risks, when Bitcoin fell by about 4%.

Regulation is an inevitable trend

Throughout the world, governments around the world are starting to tighten regulations.

As early as January, Christine Lagarde, President of the European Central Bank (ECB), warned that Bitcoin would facilitate criminal activities; the Indian government also banned related digital currency transactions.

Grayscale CEO said that there will be a good news tomorrow morning. Netizens speculate that AAVE or LINK trust will be launched: On January 25, Grayscale CEO Michael Sonnenshein tweeted that he would bring you good news the next morning. Some netizens speculated that Grayscale may announce the listing of AAVE and LINK trusts. [2021/1/25 13:24:26]

In the United States, on April 16, White House Press Secretary Jen Psaki said at a press conference that Biden agrees with U.S. Treasury Secretary Yellen’s views on regulating digital currencies, which has triggered the market’s attitude towards digital currency regulation. worry.

Today, the South Korean state-owned bank Woori Bank announced that in order to prevent suspicious overseas remittance transactions, it will temporarily set the limit of real-time online UnionPay remittance service to US$10,000 per month, US$10,000 per day and US$50,000 per year starting from April 19. The limit will remain the same. Yonhap News Agency stated that the move is to prevent Bitcoin arbitrage transactions.

Cao Yin, founder of Energy Blockchain Lab: Xunlei’s creation of blockchain ecology is a road to self-help: Cao Yin, founder of Energy Blockchain Lab, said in an interview with the media: “Internet ecology has not really been realized in China. , Even in the blockchain, there is only one case like Ethereum, but the data throughput of Ethereum is relatively low. The performance of Xunlei has not been outstanding in the past few years, and the current blockchain ecology is justified in theory , this is a road of self-help, but this is a long-term investment, and various reasons such as policies will have a profound impact on this plan.” [2018/5/20]

Although Bitcoin has been born for a long time, it is far from being popularized, but the digital currency led by Bitcoin has become a speculative tool for investment institutions and investors, which is why the government is sufficiently vigilant about digital currency.

From a regulatory point of view, the government does not want an uncontrolled currency, which will have an impact on the current economy and taxation, especially reducing the cost of breaking the law, causing potential instability. For the above reasons, regulatory risks in the digital currency market have always existed.

Especially for speculative needs, including disguised foreign exchange, ICO financing and other transaction activities, which challenged the national finance in disguise. It is a good thing to be able to trade freely without a credit foundation, but it is a bad thing for national finance.

Therefore, while countries recognize the technological innovation of Bitcoin, they pay more attention to the risks arising from its own operating mechanism. While ensuring that Bitcoin transactions are tilted towards compliance, countries are gradually tightening the supervision of Bitcoin trading activities. The future trend, on the one hand, the market needs to recognize that compliance is the development trend, on the other hand, the sharp fluctuations in the price of Bitcoin and a large number of risk events brought about by network hackers will inevitably emerge in endlessly.

Compliance is the "strong medicine" of the market

The impact of the spread of regulatory information on the digital market cannot be underestimated: the market is increasingly concerned about the regulatory attitude of digital currencies, especially the large-scale entry of institutions last year.

Since Wall Street institutions have entered the market one after another, the market volatility will become more prominent. Many Wall Street institutions will establish corresponding short positions in the Bitcoin futures market to hedge against the risk of violent price fluctuations. Compared with retail investors, institutional investors are more able to foresee the information of stricter regulation. They will randomly switch strategies, and their short positions in futures will be much higher than their spot positions.

The supervision is tightened, and the market needs to face up to the hidden dangers of investing in digital currency, instead of "yesterday was miserable, today there are songs and dances", especially at the moment when contract behavior is popular, futures contracts not only do not have the function of hedging, retail investors should always Prepare to blow up.

In fact, due to the inherent anonymity of digital currency, the contradiction between the government and digital currency is difficult to reconcile: digital currency's "lack of supervision, supervision mechanism, potential criminal activities, and high volatility of its value" means that digital currency faces "significant risk", which also caused the government's resistance to digital currency.

But having said that, having said so many disadvantages, the advantages of digital currency are equally dazzling, and the circulation of digital currency is also challenging the US dollar. Dollars and technology. Especially in terms of cross-border payments, digital currency is also a guarantee for other countries, which can continue to conduct business transactions in the face of sanctions. This has also contributed to a certain extent that many countries around the world have begun to develop digital currencies.

The way ahead

Regarding the U.S. market, the most active-zce digital currency transaction in the world, Federal Reserve Chairman Powell said that the Federal Reserve has the responsibility to be at the forefront of understanding the technical challenges, costs and benefits of digital currencies.

But Powell said that there is no rush to issue digital currency, and the Federal Reserve does not necessarily have to be the first central bank to launch digital currency. Because once issued, the digital dollar may have a huge impact in the United States and even the world.

In general, the innovation and development potential of Bitcoin cannot be denied, although there are still some potential risks and problems in the field of digital currency, and countries have different attitudes towards digital currency.

But it should be understood that digital currency is the trend of the times, and the wave of the trend of the times cannot be stopped. It can be expected that digital currency will build a safer, more reliable and intelligent new payment system for global trade.


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