In the past few years, cryptocurrencies like Ethereum, Bitcoin, and even the uber-trendy Dogecoin have more than tripled their value, making people invest and think that cryptocurrency is the future currency. Currently, 1 Bitcoin is valued at over $40,000, making cryptocurrency one of the most prolific investments.
However, economic analysts have recently seen a consistent downward trend in cryptocurrency in the past two weeks. Today, several popular cryptocurrency digital assets lost value due to several factors. Currently, Bitcoin has dropped a whopping 6.3% in the last 24 hours. Ethereum also dropped 6.2%, and Dogecoin met the same fate as it dropped 5%. According to economic analysts, they foresee a downward trend for these digital currencies in the coming weeks.
Cryptocurrency and US Congress Laws
The driving force why we can see a consistent downward trend for cryptocurrency is the lawmakers in the US Congress. According to resources in the White House, US President Joe Biden will issue an executive order next week asking several agencies to conduct in-depth research in cryptocurrency and other digital assets. Specifically, they would focus on the volatile nature of cryptocurrency and its impact on the economy. The agencies comprising this special task force are the following: Departments of Treasury, State, Justice, and Homeland Security. Smaller agencies were also requested to participate by submitting technical reports.
The primary concern for the US congress when it comes to cryptocurrency and other digital assets is the risk to financial stability as they recognize that these types of assets are more volatile than other currencies and even the stock market. There is also a rapid increase in fraud and cyber hacking for cryptocurrency for the past two years, so technical reports are needed for this study. Lastly, the lawmakers in the US Congress believe that legislation to control the use and trade of cryptocurrency is long overdue, hence, starting the deep-dive process to understand better the volatile nature of cryptocurrency.
The clamor to have proper legislation is not something that the US Congress alone wants, but it has also been requested by other financial institutions such as banks, small credit unions, venture capital firms, and publicly traded companies. Even though this executive order comes as no surprise, any uncertainty regarding the stock market is perceived as a bad sign. Hence, investors are pulling out their investments in cryptocurrency. Lastly, the stock market and cryptocurrency value have a strong correlation value, which means that if the stock market is down (as in this case), then the value of cryptocurrency is also down.
The Future of Cryptocurrency
In the long-term, cryptocurrency legislation will be beneficial both for the US Congress and the public investors. Many financial institutions have been very vocal about the need for crypto legislation – but this feedback has fallen to deaf ears until the peak of cryptocurrency, which was valued at having a multi-trillion-dollar market. We shall wait and see if the legislation will be friendly to crypto or not, but this will be beneficial in the long term.