Is it time to invest in cryptocurrencies?

Is Bitcoin crashing or set to boom?

Bitcoin prices are currently sitting on the edge of a key price level – US$10,000, down more than 10 per cent this week. If Bitcoin falls under $10K, confidence begins to drift away. If Bitcoin can survive at or above $10K amid continuing big fraud events, criticism from politicians and increased scrutiny by regulators, it could rally strongly in the second half of 2019.

Facebook faces US Congress over Libra

And cryptocurrency markets are reacting positively today, after a week of falls, to moves in the US Congress to consider a ban on Facebook Libra. Bitcoin, Ethereum, Ripple and Litecoin could be set for a strong rally, say some analysts, depending on events in Washington. Cryptocurrencies often fall in value on online markets ahead of congressional hearings on cryptocurrency and internet related issues and usually rise after positive outcomes from hearings. Facebook executives will front up to congress today to sell their plans for a new currency to US legislators.

David Marcus, Facebook’s head of the Libra project will testify before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. On Monday Mr Marcus said Libra will fully comply with all laws.

“The status quo is not working for many,” said Mr Marcus, “it is too expensive for people around the world to use and transfer their money.

“Libra can offer a more efficient, low-cost, and secure alternative.”

Billions lost to Bitcoin fraud

Complicating the outlook for crypto is continuing theft and fraud at crypto exchanges. Last week, Remixpoint, the owner of the Bitpoint Japan crypto exchange, reported that it had lost 3.5 billion yen of various cryptocurrencies. Bitpoint discovered evidence of an apparent hack last Thursday night affecting outgoing funds from an online hot wallet.

In 2018, Japan’s Coincheck exchange lost US$500m to hackers. In 2014 the then market leading Tokyo-based MtGox exchange, was shut down after losing 850,000 bitcoins worth US$500 million.

In the United Kingdom, the Financial Conduct Authority wants to ban bitcoin and other cryptocurrencies because retail consumers are unlikely to understand the risk of investing in crypto.

Bitcoin, Ethereum, Ripple and Bitcoin prices today

Today, Bitcoin prices are stabilising around AUS$15,500 after losing 13 per cent from its high last week of $18,818. Ethereum is trading just above $300, down from $450 last week. XRP has lost 21 per cent to 44 cents and Bitcoin Cash is down 25 per cent to $449 but all these currencies appear to have levelled at around current prices.

Crypto markets crashed after the US President criticised online money in a viral twitter spray last week.

“I am not a fan of Bitcoin and other Cryptocurrencies,” tweeted the President, “which are not money, and whose value is highly volatile and based on thin air.”

The President also criticised Facebook’s proposed global online currency Libra.

Is Facebook Libra getting banned by US Congress?

Now Democrat Party members of the US House of Representatives are asking congress to consider a proposed law titled “Keep Big Tech Out of Finance Act” which would effectively prohibit Facebook from issuing a currency and acting like a bank.

The draft law reads: “A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function.”

Libra is an issue of national security said the US Treasury secretary, Steven Mnuchin, yesterday. Mr Mnuchin said he is “not comfortable” with Facebook’s Libra currency because it could be used for money laundering and terrorist financing. US Federal Reserve President Jerome Powell, has asked for the Libra project to be stalled until privacy, money laundering and other concerns are addressed. The US Securities and Exchange Commission (SEC) could decide that Libra looks like an exchange-traded fund (ETF), making it an investment product which would delay the launch in the USA.

David Marcus said Libra (to be managed by a non-profit group in Geneva) could be regulated by Swiss authorities.

When is Facebook Libra being launched?

David Marcus has also raised the possibility of missing the proposed 2020 launch date for Libra.

“I want to be clear,” said Mr Marcus yesterday, “Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”

Previously Mr Marcus has said he will not adopt the traditional Facebook approach of “Moving Fast and Breaking Things.”

Is it a good time to invest in Bitcoin?

Cryptocurrencies like Bitcoin have a generally positive short-term outlook. Cryptocurrencies could rise strongly and approach all-time highs if the congressional hearings produce a positive market sentiment. Analysts at CoinDesk say if Bitcoin stabilises at current levels around US$10,000, technical market models suggest it is set for a rally in the next three months. But Alfonso Esparza, analyst at Oanda in Canada, told Bloomberg that Donald Trump’s opposition to crypto could drive the price down even further.

“It could fall further to $8,000.”

US$10,000 is considered a critical price level for Bitcoin. Falling below $10,000 is considered a danger sign for the market leader in online crypto.

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