Posted in: Older News
Published:
September 26, 2014 4:03 PM UTC

Bitcoin Price Regulation and the CFTC

The Bitcoin Price has continued its East-by-Northeast trajectory into month-end before declining to retest week-long support near $400. The US Commodities Futures Trading Commission (CFTC) has announced that it will be holding a meeting on October 9 to discuss its jurisdiction in relation to Bitcoin.…

Author: Venzen Khaosan @venzen

The Bitcoin Price has continued its East-by-Northeast trajectory into month-end before declining to retest week-long support near $400. The US Commodities Futures Trading Commission (CFTC) has announced that it will be holding a meeting on October 9 to discuss its jurisdiction in relation to Bitcoin.

Update 13h00 UTC

Trade is continuously attempting the 100-period moving average from below in this 15-minute Bitstamp chart. Will it get through?

The indicators imply not in the current wave: MACD is going into reverse divergence (which will force a downward correction) and RSI is showing the same – including touching its upper Bollinger Band which warns trade may turn down again. The larger timeframes (hourly and 4-hourly) still have plenty of room to move up, so one possibility is that price action returns to the orange trendline before reattempting $410. Another possibility is dipping back down below the orange support, but we’ve been down there already – with strong downward momentum – and buyers repelled the decline. Let’s see.

Update 06h40 UTC

This update is written prior to the opening of the US trading session with price testing the lower supporting trendline – having breached it on the Bitstamp chart. A dip to $397 was followed by a pullback to $400 but should decline resume we have targets in the $360 price area. The chart below shows where an older 3.618 Fib extension coincides with a 2.618 Fib extension derived from the current wave of decline. Today’s CFTC announcement is a necessary procedural affair but has no long-term impact on Bitcoin – for the many Bitcoin ETFs, yes – however, market participants may just use it as an excuse to resume short-selling the Bitcoin exchanges. Upside, if the market wants it, has plenty of room for advance to $465.

Bitcoin Price Movement Cautious 00h30 UTC

The Bitcoin price has, across exchange charts, traded sideways with a late dip to the lower rising trendline that has been supporting price action. Trade has traced an aggregate path that remained equidistant to two converging trendlines, annotated in solid orange and solid blue on the following 15-minute Bitstamp chart.

The significance of trendline convergence is that the apex, where the lines meet, often serves as a reaction zone in time. We may see price trade sideways into the conversion zone, or it may break out across either trendline – only to reverse in the opposite direction when it meets the apex in the future. As the 4-hour Bitstamp chart shows the trendlines converge in October. Analysis will document the apex reaction on the day.

CFTC Bitcoin Regulation

Today may see some strong movement in the Bitcoin price as news spreads of the CFTC announcement of its planned public meeting regarding its “jurisdiction with respect to derivatives contracts that reference the digital currency bitcoin.”

The topic of regulation has frequently featured in the CCN news pages and also in these analysis articles.

There is little critical debate around the matter of regulation in the cryptocurrency community. The pro-regulation camp argues from two mistaken beliefs about the benefits of regulation:

  1. regulation will eliminate Bitcoin price volatility
  2. regulation will prevent theft and malpractice by exchanges

Bitcoin Price Volatility

The matter of volatility seems to irk many critics of Bitcoin – including those Bitcoin users who feel that the volatility is somehow a “bad thing.” The argument is made that until Bitcoin’s price stabilizes it could never function as a “serious” currency.

On what material fact is this assumption based? On the Wikipedia entry for “Reserve Currency,” perhaps? It may be true that price stability is a requirement of a reserve currency, however, is Bitcoin’s design purpose really to be reserve currency?

The relative stability of most fiat currencies is not inherent but is, instead, achieved via active – and non-stop – central bank manipulation. Regulation does not (and never has) stabilized any financial instrument or currency. That regulation could somehow remove volatility from a freely traded Bitcoin market is merely wishful thinking on the part of those who want to see a stable Bitcoin price chart.

Centralized Regulation of Bitcoin

The core principle that makes Bitcoin work is its decentralization. Everything that comprises the Bitcoin network and protocol is decentralized: its consensus mechanism, its nodes, its development model, mining, the blockchain, and so forth. Any system that wants to interact with the Bitcoin protocol needs to recognize and adapt to its decentralized nature. Efforts to centralize any aspect of Bitcoin will, therefore, be discarded by the Bitcoin network in favor of mechanisms and ideas that are more decentralized.

The dilemma (actually, the irrationality) which confronts efforts to regulate Bitcoin is apparent: how is a centralized body able to regulate a decentralized network? Besides being a known participant in the failures of the existing financial hegemony, how will a third party commission be able to effectively dictate rules and parameters to a complex decentralized entity such as Bitcoin – owned and controlled by no-one? The absurdity of the proposition defies explanation.

What Bitcoin will do is to gradually eliminate all centralization and “authoritative” trust in its path. All centralized systems and trusted authorities, including Bitcoin exchanges, will give way to the tide of decentralized consensus that Bitcoin both enables and embodies.

Who Stands To Benefit

It has already been argued that Bitcoin cannot be regulated – that the idea is illogical. Those Bitcoin users who call for regulation are mistaken about the nature of regulation and its efficacy in the real world – never mind its logical incompatibility with Bitcoin. Furthermore, there are politicians and Bitcoin entrepreneurs who campaign – who lobby – for regulation. Regardless of the logical dead-end of their objective, they must be pursuing regulation for a reason. The reason is that they stand to benefit: from perceived control and the perceived credibility endowed upon their venture by the stamp of approval of some centralized “official” authority.

In the end, it means nothing for Bitcoin and its continued use. Even so, market participants will react to today’s CFTC announcement of a planned meeting to discuss whether or not it has jurisdiction over Bitcoin derivatives in cyberspace.

Economic Data and Announcements

There was a Bitcoin jackpot for some, yesterday, when the Huobi exchange accidentally paid 920 BTC to the wrong Bitcoin addresses in an accounting department error.

Later today, US quarterly GDP data will be released, as well as University of Michigan Consumer Sentiment figures.

Friday 26 September

12h30 UTC US Final GDP (quarterly)
expected: 4.6% (previous: 4.2%)
13h55 UTC US Revised UoM Consumer Sentiment
expected: 85.1 (previous: 84.6)

[divider]CCN[/divider]

CCN hosts a summarized Economic Calendar showing the week’s main data releases.

Updates to this article will be made during the European and US trading sessions should any significant events come to light.

Disclaimer

The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.

Bitcoin price charts from TradingView.
Images from Shutterstock.

Last modified: January 10, 2020 2:43 PM UTC

Venzen Khaosan @venzen

Market analyst and Open source developer with a keen interest in blockchain technology, consensus mechanisms and the decentralizing effect. He has found a solution to the PKI mechanism. Email me to discuss.

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