Cryptocurrency roundup: authorities tighten the screw

Saloni Sardana looks at the cryptocurrency stories that caught our eye this week.

Welcome back,

Bitcoin and other cryptocurrencies remained in the red this week after investors ditched risky assets and Russia, a key player, called for a ban on cryptocurrency mining.

The UK, meanwhile, is  clamping down on misleading cryptocurrency adverts.

Here are the top stories that caught our eye.

Bitcoin crashes to lowest level since early August

Bitcoin fell to a low of $38,300 on Friday. At the time of writing, it is trading just under $39,000. The bearishness was not confined to bitcoin, with other key cryptocurrencies such as ether and binance coin both down by more than 8%. The weakness comes as US tech stocks fell, with investors continuing to wonder what a hawkish Federal Reserve will mean for inflation and interest rates.

The Nasdaq stock index entered correction territory yesterday – down by more than 10% from its all-time high set in November, something which is souring investor sentiment and driving investors into less risky assets.

Victoria Scholar, head of investment at Interactive Investor, said the selloff was partly inspired by weak US stocks: “The negativity on Wall Street this week with the Nasdaq shedding nearly 5% is permeating into other risk assets including the crypto complex, she said. “A hawkish Fed trajectory, which aims to dampen price levels, is softening the appeal of inflation hedge assets.”

Russia proposes ban on cryptocurrency mining

Russia, a key player in cryptocurrency mining – the process by which new units of cryptocurrency are created and transactions confirmed on the blockchain – has become the latest country to consider banning the practice.

The Russian central bank said the ban was motivated by rising threats posed to financial stability. Some of the measures that are being considered include outlawing all cryptocurrency issuance and preventing banks from investing in them.

“The breakneck growth and market value of cryptocurrency is defined primarily by speculative demand for future growth, which creates bubbles,” the bank said on Thursday.

The proposal came shortly after Erik Thedéen, vice-chair of the European Securities and Markets Authority, told the Financial Times that the EU should outlaw “proof-of-work” , the energy intensive process that is part of cryptocurrency mining.

The potential ban could spell trouble for the cryptocurrency market, with Russia one of the top three countries for bitcoin mining. “The Russian ruble has been steadily declining over the past couple decades, which made Bitcoin an attractive investment for many Russians in recent years”, said Edward Moya, chief market analyst at OANDA, a forex provider.

Market watches may be wondering if Russia is following the same path as China, which banned cryptocurrency mining last year. China’s mining activities accounted for 65% of total global mining.

UK government to strengthen rules on misleading cryptocurrency adverts

The UK published plans this week to strengthen its grip on cryptocurrency adverts and “protect consumers from misleading claims”.

The plans published by HM Treasury said that, while ownership of cryptoassets is growing, with 2.3 million people understood to be holding cryptoassets in the UK, understanding of what cryptocurrencies are is declining.

The Treasury is proposing to make the marketing of cryptoasssets subject to the same FCA promotion rules that other assets, such as insurance products or equities.

The Financial Services and Markets act of 2000 states that a business cannot promote a financial product unless it is authorised by the Financial Conduct Authority or the Prudential Regulation Authority, or the content of the promotion is approved by a firm which is, the Treasury said.

The FCA is due to consult shortly on the proposed financial promotion rules that will apply to cryptoassets.

Markets

Here’s what happened to five of the largest cryptocurrencies by market capitalisation in the last seven days:

  • Bitcoin fell 8% to $39,000.
  • Ether fell 12% to $2,875.
  • Tether was flat at $1.00.
  • Binance Coin fell 10% to $429
  • USD Coin is down three points at $1.00.

What you need to watch out for

With cryptocurrencies such as bitcoin and ether down since the start of the year, it is worth keeping an eye on some altcoins that have been performing strongly. Some analysts think it is worth watching solana, which is up by more than 4,500% in the last year.

Recommended

Julian Brigden: markets are at a huge inflexion point
Investment strategy

Julian Brigden: markets are at a huge inflexion point

Merryn talks to Julian Brigden of Macro Intelligence 2 Partners about the unwinding of the US stockmarket's super-bubble, and the risks and opportunit…
25 Jan 2022
Has growth investing had its day? Don’t be so sure
Growth investing

Has growth investing had its day? Don’t be so sure

Markets – and “jam tomorrow” growth stocks in particular – continue to crash, with some analysts forecasting a 50% drop or more. But, says Max King, a…
25 Jan 2022
A cheap investment trust with a good record
Investment trusts

A cheap investment trust with a good record

This cheap investment trust’s yield of almost 9% may look too good to be true, but should be sustainable, says Max King.
25 Jan 2022
Tax return deadline extended – but don't forget to file
Income tax

Tax return deadline extended – but don't forget to file

HMRC is being slightly more lenient about tax returns this year, but falling behind will still incur hefty fines.
25 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022