Many bitcoin enthusiasts will remember 2017 differently; characterised by several “Aha” moments that left early investors in the digital currency richer than their wildest infant dreams. Nearly every prediction – from $10,000, $15,000 to $20,000 – for bitcoin in 2017 was blown to smithereens. Bitcoin billionaires were no longer a rarity as many laid claim. Nigeria even emerged the second country in the world with the most peer-to-peer bitcoin transactions, according to a data from LocalBitcoins.com.
Buoyed by the new wealth, many evangelists took to prophesying untold fresh prosperity levels for bitcoin in 2018.
At a cryptocurrency community conference that held in Osun State, Nigeria, in January 2018, some of the investors that sat on the panel forecasted that prices will reach at least $100,000 before the end of the year – the perfect eureka for any investor. They were so sure that regulatory efforts will have little impact on the value of the crypto.
“How do you regulate what you cannot see?” One of the investors asked the audience.
To be fair, bitcoin without regulatory hassles has enjoyed an amazing run since 2010 when it surged from $1 to $997 at the start of 2017, and soared to nearly $20,000 by the end of that year.
A number of analysts have predicted that regulatory bodies will get tired of failing repeatedly to regulate bitcoin by the end of first quarter, hence, will find a new sport to occupy their time.
Well, the first quarter of 2018 is almost winding down and so far, regulatory activities have only increased rather than slow down. The market impact has been significant as well, which also means the regulatory barricade could be getting the desired results.
The US Securities and Exchange Commission (SEC) and Japan’s Financial Services Agency expanded scrutiny to cryptocurrency exchanges on Wednesday, which sent the whole cryptocurrency market down the red zone. To be specific, in Japan two relatively small exchanges, Bit Station and FSHO had their operations suspended for one month.
Meanwhile, a senior official at the US Securities and Exchange Commission (SEC), Stephanie Avakian disclosed on Thursday to Bloomberg, that the exchange has planned numerous investigations into ICO campaigns.
Avakian noted that the agency had dozens of investigations that relate to cryptocurrency and ICOs. Additionally, the Internal Revenue Service (IRS) said it is likely that cryptocurrency investors would be facing hefty tax bills very soon.
It may be too early to call, as most stakeholders have noted, but one thing that may not be going away anytime soon is regulatory scrutiny.
It should be noted that it is not all negative with regulatory activities, as some experts have rightly pointed out. If anything, regulation is needed to bring some form of sanity to the bitcoin market and also ensure that investors’ funds are protected.
“I believe that asides the need for governments to find ways to ensure the security of these systems; there is also need to address the issue of user confidence as a fundamental element for any payment system,” Enyioma Madubuike, a cryptocurrency analyst and founder of Legitng told BusinessDay in a chat.
The first week of March, 2018, saw the volume of bitcoin trade in Nigeria drop to N1.331 billion from a brief recovery of N1.476 billion the previous week. The best it has done in 2018 was when volumes soared to N1.843 billion on the last week of January.
“I think cryptocurrencies in their nature do not want to be regulated, but as long as value is still tied to fiat currencies, regulation is inevitable,” Timi Ajiboye co-founder of Bitkoin and recently Buycoins, both based in Nigeria told BusinessDay via mail. “I am not sure how it will affect Nigeria; I just hope that when the time comes, there will be people who understand the potential of the technology among those who make the rules.”
The global price and market capitalisation were at a low at different times since the beginning of March. On Wednesday, 7 March, 2018, the price dropped to $9,494.45 representing a decline of more than $1,200 from the day’s opening of $10,709.53 on the Coindesk Bitcoin Price Index.
The bearish pattern continued same day, falling below $9,000 at $8,371.
The market capitalisation also dropped below $150 billion on Thursday, 8 March, the first time since February 14.
Chart analysis from Coindesk, however, showed that the price of bitcoin for the remaining 24-48 hours of the week, could consolidate around $8,000, or witness a minor rally to $10,000, before heading down towards the $6,000 mark.
That analysis was proved correct on Sunday morning, 18 March, as the price dropped to below $8,000 to trade at $7,515, a drop of -8.02 percent.
As at time of writing this article on Sunday, the one bitcoin was trading at $7,486.91 on the Coinmarketcap Index. The market capitalisation also dropped to a record $126 billion.
“Cryptocurrencies have reached an awkward crossroad where despite progress achieved by avoiding traditional systems and regulations, they must now submit to some form of regulation to attain the depth of acceptance needed for the next stage of development,” Madubuike said.
One thing that has come out of regulation is that, it is galvanising global exchanges to explore other uses for bitcoin and its sister cryptocurrencies that are safer and guarantees returns. On Tuesday, Coinbase, the leading US exchange and recent target of regulatory scrutiny, announced that it is releasing a weighted index fund for cryptocurrencies. The Coinbase Index Fund will give accredited US investors exposure to all assets listed on the company’s current exchange, GDAX.
Regulatory activities are also behind recent attempt to clearly define what bitcoin and other cryptocurrencies are. The most recent of these efforts is the definition of cryptocurrencies as commodities by a US district judge.
According to him, “Virtual currencies are ‘goods’ exchanged in a market for a uniform quality and value. They fall well within the common definition of ‘commodity’.” To be sure, a proper definition of cryptocurrencies like bitcoin is necessary for proper states taxation. Lack of a clear nomenclature for bitcoin was partly responsible for the US SEC’s warning on online cryptocurrency trading platforms.
In a response to the SEC’s announcement, Bittrex one of the affected platforms, made efforts to clarify that it “uses a robust digital token review process to ensure the tokens listed on the exchange are compliant with US law and are not considered securities.”
Finally, regulation could also be instrumental in forging collaboration in the community. At the moment, players are mostly operating in silos, making it difficult for them to speak with one voice.
The future may not belong to all the cryptocurrencies, currently in existence, but bitcoin has shown it is going to be around for a very long while and may possibly pose a major threat to the existence of fiat currencies. Thus, there is a need to cement its relationship with regulatory agencies as soon as possible.
