Bitcoin has been getting a lot of government attention lately, and not in a good way. A recent congressional hearing on cryptocurrencies turned into a Bitcoin bashing session with Rep. Sherman laying into the currency and describing it as ‘a crock’. This level of government scrutiny, and downright hostility from certain lawmakers has not been good for Bitcoin’s value, and could spell trouble in the months to come.
What happened at the hearing?
As multiple governments have before, members of Congress expressed their concern that Bitcoin and other cryptocurrencies could be used for nefarious purposes. There is also concern among lawmakers that cryptocurrencies are, in essence, a sham investment. This stems in part from a lack of technological understanding when it comes to the technology that makes cryptocurrencies work and a general suspicion of investments that lie beyond the control of government. There was also significant concern that many people are pouring their life savings into cryptocurrencies without understanding the risks that are inherent in any investment, especially one as volatile as cryptocurrencies have been in recent weeks and months.
What does this mean for pricing?
The hearing, and other recent events, drove the price of Bitcoin down by 40%, meaning that the value of the cryptocurrency is now 40% lower than it was at the start of the year. This new US government scrutiny, alongside pressure from India, South Korea and other countries may mean that investors move to other cryptocurrencies which have received the blessing of financial institutions and may look better in the eyes of government. At the end of the day, cryptocurrencies are a technology and it’s up to people how they are used. It may be possible to find a compromise which satisfies all players in the end. What is less certain is whether Bitcoin will be part of it.