ETHEREUM FALLS AS REGULATORY FEARS RETURN
In 2017, cryptocurrencies were the best performing asset class, with many currencies gaining by more than 1000%. This year, the trend has been somewhat broken as traders start to worry about scrutiny from regulators.
So far, there have been no major crypto-related regulations in the United States. Other countries like China have ordered the shutdown of cryptocurrency exchanges while South Korea has implemented a thorough scrutiny of the exchanges. In the US, the Commodity Futures Trading Commission (CFTC) has ruled that bitcoin is a commodity and should therefore be subject to the same rules applicable to all participants in the commodity derivatives market.
Yesterday, the Wall Street Journal reported that the Securities and Exchange Commission (SEC) was looking at whether cryptocurrencies like ethereum should be regulated as securities. Regulators are due to meet on 7 May 2018 to discuss the matter further.
If cryptocurrencies such as ethereum are viewed as securities, they will be required to adhere by all the guidelines set by the SEC. Traders fear that such regulations, coming from the biggest economy, would lead to increased selling, affecting their prices. Just last week, J. Christopher Giancarlo, the Chairman of the CFTC called ethereum and ripple non-compliant securities.
As a result of regulatory fears, the price of ethereum dropped sharply from $700 to $618 yesterday. Today, the pair has recovered some of the losses and is trading at $665. The pair will likely remain under pressure as traders wait for the final ruling on the classification of the virtual currency.