In this week’s episode, we continue our review of the list of news items exerting downward pressure on the price of bitcoin, how the SEC isn’t helping in this regard, and explain why the recent acquisition of altcoin exchange Poloniex by bitcoin app giant Circle helps to further tie the knot between cryptocurrency and Wall Street.

MtGOX Liquidation, SEC Regulations to Blame for Continued Losses

Bitcoin plunged beneath the $9000 level as of Monday morning on rather heavy trading, capping a 7-day losing streak which saw prices drop some 20%. Despite assurances that the market would enter a calming period after the last of the infamous MtGOX stash had been liquidated to raise funds for court fees, the sell-off continued, with 15 of the top 20 coins ending the week in the red. The total market capitalization of all coins sank to its lowest level since early December 2017, at a paltry $364 billion.

Also adding to the woes of the cryptocurrency market are looming prospects of regulation by the Security and Exchanges Commission (SEC), which stated last week their intentions to require registration for all cryptocurrency exchanges, ICOs and other coin trading enterprises that operate within the U.S. The SEC, which labeled cryptocurrencies “an unregulated mess,” are hoping to curb their more illicit uses – such as money laundering and the purchase of illegal goods – while simultaneously providing a legal framework for their non-illicit uses.

While most hardcore bitcoin idealists remain firmly objected to any sort of government interference or regulation of cryptocurrency (as it goes against universally-available, libertarian-based roots), a small contingency of optimists within the community welcome regulation with open arms, under the prospects that enhanced guidance and clarity will bring the semblance of stability required to attract merchant adoption. With its continued wild swing in volatility, bitcoin and most cryptocurrencies remain non-viable options as a method of payment.

Poloniex Sold to Wall Street-Backed Circle

Not everybody is running away from cryptocurrency these days. In a surprising move earlier last week, the app-based bitcoin exchange Circle purchased long-standing altcoin exchange Poloniex in a $400 million deal. The Goldman Sachs-backed Circle made the move in spite of numerous recent stories of exchanges being hacked or going offline with no explanation. While Poloniex is already available to users in 100 different countries, Circle hopes to expand their reach even further with the help of their financial industry corporate connections.

One of the hallmark products of Circle, Circle Pay, allows users to send cryptocurrency back and forth to each other without having to pay transaction fees. It accomplishes this by making use of “off-chain transaction,” or transactions among parties that are not recorded to the main bitcoin blockchain. Circle has pledged to keep the core functions and design of Poloniex in tact in order to not scare away existing users, and has its eye on the development of a Poloniex mobile app to attract new ones.

Even though the marriage between Wall Street and bitcoin remains unofficial, the knot between the two entities has become a little more tightened with the completion of the deal, which is the biggest of its kind. Lloyd Blankfein, the long-running CEO of Goldman Sachs who is set to step down from his position sometime this year, is himself no huge fan of bitcoin. In an interview during an Asian economic summit earlier in the month, he described his attitude towards cryptocurrency as “negative, but… not hysterical”, citing that while bitcoin may not be able to function as a viable currency, its underlying blockchain technology was still remarkable and had the potential to contribute positively to society in the future.

Also in the News

  • Comedian / late night talk show host John Oliver delivered a profound and extraordinarily articulate explanation of bitcoin and its current state of affairs during a 25 minute segment on his weekly HBO show last week. Not only is it a highly informational piece worthy of showing to those who want to understand bitcoin in the simplest way possible, Oliver’s irreverent, no-frills comedic style adds a layer of entertainment value that makes it watchable for even those with the shortest of attention spans. The only media criticism of the piece was the wish that it would have been run sooner.
  • In order to provide an accessible “sentiment gauge” of public interest in bitcoin, news agency Thompson Reuters launched a tool to help keep track of the cryptocurrency’s worldwide popularity, as measured by the relative frequency of times it appears in news publications, as a search term, and the number of websites containing the word “bitcoin.”
  • To end on a positive note, financial journalists at Business Insider declared their support for the future of blockchain technology, noting that just because a bitcoin bubble is bursting, it certainly does not spell the end for the blockchain at large. Cryptocurrency markets are currently echoing sentiments of the headache caused by the end of the “dot-com bubble” of the early 2000s, in which investors poured way too much money into what was legitimately the next big thing (e-commerce). The problem was – similar to the current situation with the crypto bubble – legitimate products were being completely, irrationally over-valued, as hype surpassed common sense and investors tripped over each other to enter an already flooded market. Perhaps now that cryptocurrency is moving out of the bubble phase (perhaps), markets will begin to react more rationally, based on the actual contributions blockchain technology has to offer the world — and they are many.