Though crypto regulation and enforcement are ramping up globally, a new Bloomberg Crypto Outlook report does not expect the U.S. to follow China with a ban on cryptocurrency. After the Chinese government’s ban on crypto-related transactions last September, there has been an industry-related shift to the U.S. which has now triggered a new talking point at the global level.
The Bloomberg Intelligence (BI) research suggests that despite U.S. regulators having all the oversight authority on cryptocurrency exposure as they impact the market and money laundering, only Congress can deem digital currencies unlawful and the senators may only discuss acting on such regulatory measures in the event of a serious breach using cryptocurrencies like Bitcoin.
“We expect only an extreme event, like a terrorist attack financed by Bitcoin or a cyberattack worse than that on the Colonial pipeline, could drive a divided Congress toward restrictions or an outright ban,” it states. However, without such an hindrance in the next coming months, the report suggests that the next key Bitcoin threshold may be $100,000 as the top cryptocurrency is “more likely forming a floor than a ceiling” and could disappoint range traders that are used to $30,000-$60,000. The declining Bitcoin supply as against its increasing adoption especially as Bitcoin production is dropping to less than 1% of the total by 2025 is a contributing factor to this outlook.
Bitcoin had traded down over 50% from all time highs (ATHs) at the end of January and investor profitability has deteriorated to record heavy losses onchain, according to a recent GlassNode analysis. The crypto analytics firm shows that Bitcoin exchange balances reduced to multi-year lows as a result to 42,900 BTC in outflows since the November ATH as against the May 2021 record when exchanges had 164000 BTC in net inflows. It also indicated that Bitcoin transfer volumes continue to be dominated by institutional size flows, with more than 65% of all transactions being larger than $1 million in value having started around Oct 2020 when Bitcoin prices were between $10,000 and $11000.
While suggesting that Bitcoin is well on its way to becoming global digital collateral, the authors of the Bloomberg report set out key reasons why they think U.S. policymakers will embrace cryptos with proper regulation and ETFs in the coming months. They include dollar dominance, jobs, votes, lots of revenue (tax) and its running counter to China’s antipathy. They also added that a broad legislation that seeks to both embrace and restrict cryptocurrency usage may not get bipartisan support in 2022 as many of the policymakers are still learning about the subject and there is the midterm election later this year. They opined that nascent Bitcoin is “facing another maturation test in 2022 vs. risk-asset deflation” which may make this year in cryptos “remind us of the 2000-01 internet purge, which helped form the foundation for the revolutionary technology.”
On the topic of the U.S. issuing a central bank digital currency (CBDC) in 2022, the research suggests that the U.S. Fed is not likely to act on creating a CBDC in the next few years but is rather studying the subject.
