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Jul 29, 2020

Beautiful misunderstanding! Bitcoin’s breakthrough of $10,000 has nothing to do with regulation. One picture to understand the reason behind the surge!

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Bitcoin’s recent trend is very boring. After nearly two months of sideways trading at 9,200-9,600 dollars, it has been smooth, and it has been jokingly called by the industry that “bitcoin will soon become a stable currency if it stays so static .”

Suddenly, on July 26, the price of Bitcoin broke through $10,000 after a few consecutive passes, and now it has reached $11,000, which is the first time since June 1st. The cumulative increase has exceeded 20%, which has attracted attention from all walks of life.

1. Bitcoin’s “ID Card”?

Many people attribute this Bitcoin price breakthrough to the recent U.S. Federal Court’s judgment on Bitcoin, which defines Bitcoin as “money” and believes that Bitcoin has been officially recognized as a legal “identity card”. As a result, the currency price rose sharply.

This is a beautiful misunderstanding.

According to Bloomberg News, on July 25, Washington, DC Chief Justice Beryl A. Howell said that the virtual currency Bitcoin is a kind of “currency” covered by the “Money Transmitter Act” in Washington, DC.

The judge made these remarks against the background of criminal charges against an illegal bitcoin platform trader Larry Dean Harmon for unlicensed operation of remittance and money laundering. According to the regional laws of Washington, DC, any remittance business needs to apply for a remittance license. The defendant tried to defend himself by proposing that “Bitcoin is not currency, and the platform it operates is not a remittance business under the United States Code.” The judge finally dismissed the defendant’s defense, only to have the above statement that Bitcoin is a currency.

Bitcoin is determined to be a currency by a SAR judge. Will the impact be large enough to push up the long sideways Bitcoin to $10,000? In fact, the judge’s decision did not have any substantive impact, because Bitcoin’s recognition by state law as a currency is nothing new at all. In fact, Bitcoin is recognized as currency by state laws in most states in the United States.

After the chain, Mr. Cai used to be the head of digital currency exchange in the United States. When expanding the US business, he once applied for a business license from the state to state, which is the “Money Transimittting License” mentioned above. License, MTL).

Not only in the states, but a special agent at the federal level in the United States also considers Bitcoin as currency. FinCen, the Office of Financial Crime Prevention and Anti-Money Laundering under the U.S. Department of the Treasury, believes that digital currency is closer to currency. Therefore, it is stipulated that all institutions involved in digital currency in the United States must register on FinCen as a Money Service Business (Money Service Business, MSB), and need to set up a corresponding compliance department internally.

The Washington, DC judge merely reiterated that Bitcoin is a currency under state law. This is a well-known fact of digital currency transactions in the United States. Therefore, overseas media reports are quiet, while domestic players are rushing to confess and celebrate, making people laugh.

2. The key is not the judge but the Fed! 

Of course, the U.S. regulatory system for digital currencies is very complicated, which is also an important reason for this beautiful misunderstanding.

At the state level, most of the state, like the aforementioned Washington, D.C., regard Bitcoin as a currency, and to operate this business requires a remittance license. And New York went one step further and set up a special operating license for digital currencies called BitLisence. Some states also prohibit bitcoin transactions.

At the federal level, the Federal Reserve has the most qualitative say about the digital currency, but she tried her best to throw it away, stating that digital currency is not a real currency and the Federal Reserve has no legally authorized responsibilities and obligations to directly supervise it. The Securities Regulatory Commission SEC recognizes all tokens except Bitcoin as securities, the Futures Trading Commission CFTC recognizes Bitcoin as a commodity, and the tax bureau IRS believes that digital currency is an asset that needs to be taxed. There are also the OCC Currency Management Office, the CFPB Consumer Protection Bureau plus the FinCen mentioned above, etc., according to different functions, there are different definitions of digital currencies.

The United States has not yet formed a unified system for digital currency supervision, and various departments overlap. For detailed analysis, please refer to the post on the chain, “Digital currency series 6 in the eyes of economists: Advance with the times (Supervision)”

In short, unless the Federal Reserve declares Bitcoin as currency, no one can say that it is of much use. In addition to explaining the existing laws, a judge can’t exceed his own judicial authority and replace the administrative supervision department and the legislative department to change the characterization of Bitcoin.

3. Supplementary gains pulled up

Bitcoin broke through 10,000 U.S. dollars, not because of a sentence from the judge. What is the reason behind it? A picture is worth a thousand words, and this picture is a good explanation of the reason for Bitcoin’s surge.  

Gold has soared in the past two months, repeatedly breaking new historical highs, reaching a high price of $1,948 an ounce, which is only one step away from the $2,000 mark. The reason is that the global outbreak of the new crown epidemic has caused severe damage to the global economy and triggered global currency expansion. At the same time, the international political situation has become increasingly tense, and the deteriorating Sino-US relations are worrying. These major and far-reaching political, economic, and social impacts have caused Investors are deeply disturbed and flock to gold, known as a safe haven under anxiety, pushing up the price of gold step by step.

Bitcoin, like digital gold, is also one of the choices for safe-haven assets. It should have the same upward momentum as gold and gather upward potential energy, but it is extremely quiet and inviting. It was not until recently that the price of Ethereum broke through due to the fierce Defi market, and Bitcoin followed by a sharp rise.

It can be said that Bitcoin’s surge this time is more of a supplementary increase driven by gold and Ethereum, which has nothing to do with the speech of the US judge on Bitcoin.

Bitcoin has been sideways for too long, and the holders are very anxious and understandable but don’t be too excited. Regarding the market outlook, everyone should stay calm and watch the changes.

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