UK Bitcoin Regulation False Alarm; Economy on pace with 6.7% growth

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Crypto Coin

The UK’s Financial Conduct Authority (FCA) spoke up, the media responded, the market yawned and the price of Bitcoin rose.

It’s a story of misrepresentation, and the market reaction underscores how little control the UK regulator, or any government, has over a decentralized asset like Bitcoin.

Numerous reports said Monday that the FCA had banned Binance Holdings, the world’s largest cryptocurrency exchange.

At their peak in the late 2010s, Chinese miners would have produced 95% of the world’s Bitcoin. Here, an official checks the equipment inside a Bitcoin mine near Kongyuxiang, Sichuan, China. Paul Ratje / For the Washington Post via Getty Images

In fact, the regulator had simply reminded the company to trade in derivatives.

“The only story here is that the initial report on this was misleading and confused some UK retail users,” Jason Deane, Bitcoin analyst at Quantum Economics in London, told Newsweek. “The FCA’s position has not changed, there are no new policies and it has no material effect on the trading habits of anyone in the UK who can still use Binance, and everyone else exchanges, for spot trading exactly as before. “

The FCA told Binance to make sure it does not actively promote regulated products such as futures, options and “contracts for difference” (CFDs), an agreement between the buyer and the buyer. seller which stipulates that the buyer must pay the seller the difference between the current value of an asset such as Bitcoin and its value at the time of the transaction.

“These derivatives were already banned in the UK some time ago,” Deane said, “so this is just a rewording of the rules.”

It would be difficult, if not impossible, for the UK government, or any other government, to ban Bitcoin, he said.

“The network is truly global and fully decentralized in that even the most powerful governments on the planet cannot interfere with it in any way,” Deane said. Governments can, however, make it difficult to use or exchange by controlling entry and exit ramps through the banking system, and some have tried. Even so, since moving Bitcoin between jurisdictions is, for design, so easy, it has limited effect and may in fact cause capital flight from the jurisdiction trying to prohibit it. “

Deane said many investors would welcome “measured and common sense legislation” but it could create difficulties for governments as it would likely be seen as state-level “legitimization” of cryptocurrencies and this could, at least in theory, weaken a government’s power over monetary policy.

In January, the FCA warned that Bitcoin investors should be prepared to lose all of their money. “Investing in crypto-assets, or related investments and loans, usually involves taking very high risks with investor money,” the FCA said.

Government policy so far has ranged from China’s efforts to shut down Bitcoin mining operations to El Salvador’s adoption of crypto as legal tender.

Up to 75% of Bitcoin’s mining operations were located in China. Closing mining operations can temporarily disrupt the hash rate.

But all miners need is an internet connection and reliable, cheap power to restart operations in a new location. Some seem to be heading towards the United States, Canada, Eastern Europe, Northern Europe and Kazakhstan, China’s immediate neighbor.

China is testing a digital version of the yuan. It’s unclear whether Beijing’s decision to crack down on mining will be damaging in the long run.

Meanwhile, CME Group said the daily trading volume for Bitcoin futures contracts since the start of the year has averaged 11,500 contracts per day, a 40% increase from 2020. The contracts represent the equivalent of 57,500 Bitcoins.

Some investors use futures and options to hedge against wild fluctuations in Bitcoin prices. The Chicago Mercantile Exchange had introduced Micro Bitcoin futures at one-tenth the value of one Bitcoin to allow a wider range of traders to manage price risk.

Billionaire Mircea Popescu, who claimed to own more than a million Bitcoins, is said to have drowned while swimming off the coast of Costa Rica.

In 2011, he tweeted: “Bitcoin is the most important project of the human species right now. That’s it.”

Popescu, 41, was a Romanian citizen. The status of his estate and the Bitcoin fortune he held are not yet clear. If Popescu’s coins cannot be collected, it will reduce the supply and if the demand is high, the price will increase.

At midday on Tuesday, Bitcoin changed hands to $ 36,147.90, up 3.99% in the last 24 hours and 24.67% for the year. The 24 hour range is $ 33,976.55 to $ 36,425.89. The all-time high is $ 64,829.14. The current market capitalization is $ 678.20 billion, CoinDesk reported.

Market momentum

S&P Global raised its economic forecast as the United States continued to rebound from the COVID-19 pandemic.

“We expect the US economy to experience a summer boom, fueled by reduced virus fears, high savings and rising wages,” S&P Global said in a report. Pictured is Beth Ann Bovino, chief economist at S&P Global. spratings.com

“We expect the US economy to experience a summer boom, fueled by reduced virus fears, high savings and rising wages,” the independent Wall Street market news provider said in a report. “Already seen in spending data, the shopping basket shifts from goods to services as people let go of their midlife blues.”

Air travel was up, but still 25% below the 2019 average. S&P expects travel to pick up during the holiday season, especially as the United States moves closer to the collective immunity.

On June 27, the Transport Security Administration screened 2,167,380 passengers at U.S. airports, 241.96% above the 633,810 screened on the same day last year during the pandemic, but still 17.65% below 2,632,030 audited in 2019.

Airlines are betting on a rebound.

In March, budget airline Southwest Airlines ordered 100 Boeing 737 MAX 7s, the largest order for the plane since it came to rest in 2019.

But inflation and the labor market remain areas of concern, S&P Global said.

The Federal Reserve, the country’s central bank, now expects personal consumption expenditure inflation to hit 3.4% this year and 3.3% next year before falling back to 2.1%. Its target is 2%.

The Fed said the rise in consumer prices was “transient” and reaffirmed this view, albeit with less conviction, at its recent meeting.

President Jerome Powell stressed the need for “humility” in forecasting when addressing the press after the last Federal Open Market Committee meeting.

S&P expects the first rate hike in 2023 rather than the previous forecast in 2024.

“We expect the ‘hike’ in policy rates to be one hike in the first quarter of 2023, with a second hike in the third quarter and two more hikes in 2024,” S&P said.

The Fed cut interest rates to support the economy during the pandemic and kept them low to stimulate the recovery. Low interest rates boosted real estate sales and consumer spending, but hurt small savers.

The economy created 559,000 jobs in May, but that was not enough to keep up with demand. However, the wage bill is still down 7.6 million, or 5%, from February 2020, the month before the pandemic began, and authorities shut down the economy as part of efforts to curb the crisis. spread of COVID-19.

“There is still a long way to go,” said S&P Global. “If the economy continues at this current rate of job creation (540,000 on average over the past three months), the US job market will not recoup the 22.4 million jobs lost before mid -2022. But this average monthly pace would be difficult to maintain past the third quarter, as the jobs that become available when the economy reopens are the fruit at hand. We plan to reach the pre-pandemic milestone only. in the fourth quarter of 2022. “

A variant of the coronavirus could increase later in the year, but it is unlikely to cause a lasting economic downturn severe enough to be considered a recession.

S&P Global has set the risk of a recession over the next 12 months at 10% -15%, down from the January 20% -25% estimate, and close to the long-term ‘unconditional’ risk average. 13% term.

Public spending supported the recovery.

“Our May 2020 Infrastructure Report found that a $ 2.1 trillion infrastructure program, similar in size to the $ 2 trillion program proposed by Biden as a candidate, if it were to be done wisely, would add an additional $ 5.7 trillion to the economy over 10 years, add 2.4 million jobs by 2024 and increase productivity would create more jobs plus late, ”S&P said.

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