Will the Trump administration end cryptocurrencies as we know them? - March 11, 2020

Will the Trump administration end cryptocurrencies as we know them?

Cryptocurrencies may face a serious setback as the United States seemingly poses strict rules on them. President Donald Trump is not fond of the payment method, and now Fed executives are speaking against it. What can we expect?

“We want to make sure that technology moves forward; on the other hand, we want to make sure cryptocurrencies aren’t used for the equivalent of old Swiss secret number banking”, said Treasury Secretary Steven Mnuchin a week ago. He also added that “We are about to roll out some significant new requirements”.

Is this the end of crypto?

This might very well sign the end of cryptocurrencies as we know them today. Rules like this may take away one of the most important attributes of them as these virtual currencies gained ground because they are anonymous. There’s no central government or organization behind them, they are only present on a network on computers. This makes them untraceable.

Several governments have already raised voice against this because they believe that cryptocurrencies are great for criminal activities such as drug trafficking. This might be true, but other fans of cryptos were everyday people who are keen on privacy. Nonetheless, without any central authority and legal background, there’s no protection for the consumers in case of loss or theft.

End of the currency gamble?

Apart privacy, there was another reason behind the cryptocurrency craze. Its skyrocketing price made people believe that it’s the future of investment, and Bitcoin is the gold of the future. Although some may call it “investment”, we believe that it’s more like gambling. We take this stance because it’s impossible to diversify with virtual currencies, as we have proved in this blogpost. We believe that’s one of the most important keys in true investing.

This and high volatility became an even more serious problem during 2018, at the height of Bitcoin bubble. During this period people even started to get mortgages to buy Bitcoin. There were times when the price of the currency was around $20 thousand, then in a rather sharp fall, it went back to around $6 thousand, and so far, it only recovered to around $9 thousand. Some cryptocurrency “investors” made huge losses without any chance of redemption.

The details will come

Mnuchin also said that we will soon see the results of a lot of work. It’s an interesting wait, as many other governments are also working on better regulations. We still believe that blockchain, the technology behind cryptocurrencies is useful, but better monetary regulations for virtual currencies is much needed.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.