Cryptocurrency Market Capitalizations

Key Takeaways

  • Treasury Department looks to introduce new cryptocurrency regulations
  • A variety of factors including Central Bank interest in digital currencies raise investment activity
  • Bitcoin's upcoming halving increases investor excitement

United States Treasury to Create Cryptocurrency Regulation

In an effort to crack down on illegal activity, the Trump administration plans to introduce cryptocurrency regulations. Treasury Secretary Steve Mnuchin said “we are about to roll out some significant new requirements. We want to make sure that technology moves forward; on the other hand, we want to make sure cryptocurrencies aren’t used for the equivalent of old Swiss secret number banking.”

Mnuchin informed legislators that regulations were being created in a combined effort among various agencies and financial regulators. The intent is to advance the transparency surrounding Bitcoin and other cryptocurrencies. The motive stems from concern over the potential anonymity of transactions and the convenience it can have for criminal activity to take place. Cryptocurrencies can also give countries that are experiencing sanctions from the United States, like Iran, a way to side-step them.

Few details regarding what exactly the regulations would include were mentioned, creating much anticipation. The only information given was that it would become easier for law enforcement to see where money was flowing in order to better detect money laundering.

At the beginning of Trump’s term as President, he downplayed the potential disruption that cryptocurrencies pose to the current financial system. Then, Mnuchin stated over the summer that cryptocurrencies may be a national security threat and said that he had “very serious concerns” about Facebook’s (FB) Libra project. 

As time has gone on, Trump has shared his opinions regarding cryptocurrency by saying that he is “not a fan” and that their value is “based on thin air.” Trump also warned that Facebook would need to obtain a banking charter and follow banking regulations in order to move forward with its Libra project.

Trump and Mnuchin have also been making the push to re-allocate some of the Secret Services resources back to the Treasury Department from the Department of Homeland Security. This reallocation was put forth in Trump's new budget proposal which aims to have the Treasury Department and the Secret Service working in tandem to monitor cryptocurrencies.

While the government is working on ways to regulate and monitor illicit activity with cryptocurrencies, it is also exploring the pros and cons of developing its own. With China’s upcoming release of its own digital Yuan, pressure has been mounting on other central banks to keep up with technology and to not fall behind. The chair of the Federal Reserve, Jerome Powell, said that the bank has been seriously looking into the potential of having its own digital currency. 

Powell said that “the benefits would include perhaps greater financial inclusion, lower costs, more convenience. There’s a lot to weigh and a lot to work on there. Every major central bank in the world right now is doing a deep dive on digital currencies, and we think it is our responsibility to be at the very forefront of knowledge and thinking about a central bank digital currency.”

Bitcoin Sees Some Upward Price action

By the end of November 2019, Bitcoin had dropped to around $6,500. Bitcoin has slowly risen since, but Mr. Powell's recent comments on Bitcoin have pushed it to its highest level this year and in the last five months. It reached around $10,500 then fell slightly from this peak, but the federal reserve showing concern and interest around digital currency seem to have sparked more investment in Bitcoin and other cryptocurrencies.

The Federal Reserve’s interest in the space may have caught some attention, but other factors like the coronavirus outbreak could be another cause. Many businesses in Wuhan, including banks, have been closed during the outbreak, potentially leading some to other financial alternatives like Bitcoin.

“External factors contributing to the rise above $10K include global uncertainty around the Coronavirus outbreak,” said the head of business development at the crypto exchange Luno, Vijay Ayyar.

Both the coronavirus and Powell’s direct comments about Bitcoin and cryptocurrency could have had a boosting effect on its price, but the more likely reason is the upcoming Bitcoin reward halving.

Frequently called the “halvening,” the halving is an event that occurs roughly every four years where the reward for mining Bitcoin blocks is cut in half. When a block is mined, the miner is rewarded. This means that the Bitcoin code recognizes this and releases new Bitcoin to their address. The halving cuts the rate at which new Bitcoin is released to the market in half as well, which reduces the supply. Mining rewards can be thought of as artificial inflation that is decreased by half every four years.

Past halvings have caused upward price action. The Bitcoin price prior to the last halving in 2016 was around $630. Some of the recent increase in prices may be attributed to 2020's upcoming halving in under 90 days.

Performance Year-to-Date

Crypto mcaps
  • Bitcoin (BTC) YTD: 42.19%. Last weeks YTD - 35.95%
  • Bitcoin Cash (BCH) YTD: 129.14%. Last weeks YTD - 115.42%
  • Ripple (XRP) YTD: 69.13%. Last weeks YTD - 46.06%
  • Ethereum (ETH) YTD: 103.07%. Last weeks YTD - 63.51%
  • S&P 500 YTD: 4.43%. Last weeks YTD - 3.54%

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