Bitcoin price is highly prone to the overall sentiment built around in the market. A few weeks ago, as Facebook unveiled its plans to launch a blockchain-based cryptocurrency Libra, trust around bitcoin also started to grow, taking its price up in the following weeks.
Now as questions are being raised regarding Libra’s regulatory credibility as a global currency by influential people like U.S. President Donald J. Trump, bitcoin’s price is seeing a slump as well. Just a few days ago, the asset was seen in the $13,000s and on Wednesday, a drop to $9,100 was observed following the negative aura that has been built around Libra from a regulatory standpoint.
Facebook has a user base of billions transcending borders across the globe. It’s ambitious plans to launch a global currency was naturally expected to attract the attention of the lawmakers. After the much-hyped early days, questions started to arise regarding the future of Libra with people like Federal Reserve’s Chairman Jerome Powell saying he had “serious concerns” regarding Facebook’s crypto plan. President of the United States Donald Trump also chimed in a few days back, stating in a Twitter thread:
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity
Media hype has always played a big role in manipulating bitcoin’s price, both up and down. FOMO, fear of missing out, usually drags people in this space when tendencies are being shown for a bull-run. Similarly, a lack of trust drags people out of this space.
With dismissive statements like these made by Trump recently, the fear of future scrutiny and tight control forces people to cash out before the price drops. Most people that are in the bitcoin and crypto space are here to gain profits off the price movements.
Everyone wants to make the best of their investment in the bitcoin world and in times where a negative aura is hinting a price drop, cashing out makes the most sense. This lack of any physical backing and hype-prone price uncertainty is also one of the reasons why trust regarding the digital asset is low in both the general public and the institutional investor community.
Tether, a well-known stablecoin floating around in the crypto space, also went through an event over the weekend that exposed the fragility associated with this nascent space. The company accidentally created more than $5 billion of coins in an instant thus flooding the market with increased supply. This not only decreased trust regarding the cryptocurrency arena but also drove down the price of bitcoin.
Monday saw the United States Secretary of Treasury, Steven Mnuchin, raise national security concerns about Libra while emphasizing the use of cryptocurrencies for illegal activities in the past. The following day saw Facebook being questioned by U.S. senators regarding its possible role as a global currency leader.
There is a lack of trust regarding Facebook handling a global currency. Besides, there is a lack of regulatory frameworks around the nascent world of cryptocurrencies. The cryptocurrency world is a technological innovation and time is needed before proper legislation can be made around it.
Democratic Sen. Sherrod Brown compared the social media giant to a “toddler who has gotten his hands on a book of matches”. The sentiment around this space is negative when it comes to the official side of the business.
All in all, Facebook’s Libra is facing a hard time in the hands of the lawmakers as regulatory clarity is of the utmost importance when it comes to the world of finance, otherwise illegal activities can storm this space. Amid Libra’s troubles, bitcoin has also been bearing the brunt by dropping down in value. Although the asset has bounced back a bit and is floating above the $10k mark at the time of writing, it seems that bitcoin’s price will be hugely affected by developments that are going to be made on Facebook’s Libra in the future.