Dogecoin Rises As Crypto Market Stays On The Limit

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Dogecoin’s surge on Tuesday challenged more weaknesses in the crypto markets ahead of a key Federal Reserve meeting and new regulatory pressures.

Tesla CEO Elon Musk plugged in Doge on Tuesday morning, tweeting that “Tesla will make certain products purchasable with Doge and see how it goes.” Musk sent the tweet at 5:34 a.m. EST, triggering an almost instantaneous rise in the “meme” token, which rose 20% in the afternoon trading to $ 0.1913.

Still, most of the major cryptos continued to fall, with Bitcoin down 1.5% to $ 46,800 and Ether down 1.5% to $ 3,770.

The market is on the alert ahead of a key meeting of Federal Reserve officials, which ends on Wednesday. The Fed is expected to cut its purchases of treasury bills and mortgage-backed securities by $ 30 billion in December, double its reduction of $ 15 billion in November. This would remove liquidity from the market at a faster rate, ending asset purchases as early as March 2022. The Fed is then expected to start raising rates in June 2022, with three hikes next year.

Still, investors will be scrutinizing the Fed’s tone to see if monetary policy gradually tightens. Soaring inflation raises fears that the Fed may become more hawkish in its tone or policy. Stocks sold on these concerns on Tuesday, putting pressure on other risky assets like cryptocurrencies.

The worry, of course, is that as the Fed turns off the tap, there will be less imaginary money to invest in imaginary assets, assuming that most cryptos have no intrinsic value and are mainly used for speculating.

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Stablecoins, meanwhile, were in the hot seat in Washington during a Senate Banking Committee hearing. Stablecoins are cryptocurrencies designed to hold a fixed value of $ 1, backed at 1-1 by cash or other liquid reserves.

Democrats and Republicans have grilled industry supporters and investor advocates along partisan lines, with the two sides appearing far apart on a regulatory consensus.

Committee Chairman Sherrod Brown (D., Ohio) reiterated the Democratic view that stablecoins pose “systemic problems in our economy”, arguing that cryptos have led to “savage financial speculation” and that coin issuers are not transparent or decentralized, making them more like unregulated banks.

“It certainly looks like a potential asset bubble,” said Brown, comparing the rise of cryptos to the stock market crash of 1929 and the build-up of subprime mortgages and derivatives that sank financial markets in 2008. .

Stablecoins create a link between the real economy and the “fantasy” economy, he added, reiterating support for tighter regulation from the Biden administration.

Senator Elizabeth Warren (D., Mass.) Also had harsh words for the industry. The coins “supports one of the shadiest parts of the crypto world, the place where consumers are least protected from scams,” she said, referring to Decentralized Finance Networks, or DeFi . Regulators must “take the crackdown” on these risks seriously before it is too late, she added.

Republicans, for their part, argued that stablecoins could lower transaction fees, encourage financial inclusion, and expand the use of “programmable currency,” which could be deployed for automated transactions and micro- payments that are not possible with traditional currency.

“Given the potential of these new capabilities, any regulations must be tightly tailored and designed to do no harm,” Senator Pa Toomey (R., Pa.) Said in a statement.

One thing everyone agreed on is that regulation is needed, even though consensus has seemed elusive. Toomey, for example, rebuffed recent White House recommendations that all coin issuers be registered as banks or insured depositories, saying it “stifles innovation.”

More judicious, he said, would be transparent disclosures of assets and buyback policies, required audits and modernized rules for financial supervision.

The partisan split isn’t just on Capitol Hill. The two Republican Securities and Exchange Commissioners, Hester Peirce and Elad Roisman, have lambasted the regulatory tactics of SEC Chairman Gary Gensler. They argued that its program “makes no mention of any regulation regarding digital assets,” adding that the silence sends a signal that the market can expect more questions than answers on whether the cryptos are considered securities under existing laws.

“Such silence emboldens fraudsters and embarrasses conscientious participants who want to comply with the law,” said Peirce and Roisman.

However, Gensler has repeatedly stated that he believes certain cryptos are considered securities under existing laws. And the SEC has regulated the industry through enforcement measures.

The only thing everyone agrees on is that crypto needs new rules. What they should be is nowhere near being resolved, however, leaving the market vulnerable to tweets and political partisanship that shows no signs of abating.

Write to Daren Fonda at [email protected]

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