The gains posted by Bitcoin several months ago seem to be a distant past, considering the bullish sentiment faded and the largest cryptocurrency in the world posted its first 50% drawdown since the pandemic had begun. $65,000 proved to be a strong ceiling and now the buyers continue to struggle keeping the price above $30,000. A series of regulatory hurdles have hit the investors’ confidence, as they wait to see if laws will be put into place.
South African Scam Scares Investors
One of the countries that were in the spotlight over the past few weeks is South Africa, mainly due to an alleged Ponzi scheme worth $3.6 billion in Bitcoin, which is showing there are still vulnerabilities with crypto investments.
Kuben Naido, chief executive officer of the Prudential Authority, the South Africa banking regulator, and also deputy governor of the South African central bank, stated that a regulatory framework could be ready within a few months, according to a Bloomberg article:
“We are trying to put in place the regulatory framework quickly…Our view is that crypto is a financial product and should be regulated as a financial product.”
Bitcoin downside capped by $30,000
The past year has been marked by a surge in BTC trading interest coming from both institutional and retail investors. Via trading apps for Bitcoin, any person is able to take advantage of price movements from the comfort of their home, which had been facilitating more flows into the largest cryptocurrency, as well as other altcoins.
Despite favorable capital flows, the bullish run in Bitcoin failed to extend above $65,000, where it topped in April 2021. Since then, the price had been trading lower and for the time being, the area around $30,000 had acted as a strong support zone, preventing major losses below it.
UK regulation in the spotlight
Whether or not this is where the corrective structure will end or there could be another flush lower before a major pullback higher is still unknown. On top of the uncertainty created by the South African Ponzi scheme, bad news is emerging in the UK, where crypto firms are pulling out from FCA registration.
Scrutiny is rising in the crypto sector and recently, Binance, one of the largest cryptocurrency exchange platforms in the industry, was banned in the UK, after withdrawing its registration application in May.
Implications of regulation in the longer run
Even though the cryptocurrency market had perceived regulation negatively, leading to a sharp drop in valuations, in reality, such developments can have positive implications for the industry. Scam companies can be whipped out and all the companies can operate in line with the highest standards. However, the uncertainty on whether regulation will foster growth or will act as a roadblock is what continues to be one of the main concerns. Not all countries are keen on the idea of decentralized money and for now, there are little prospects for the adoption of crypto as a widespread official means of payment, even though El Salvador had already done that.