The Heavy Hand of Government Regulation Looms Over Cryptocurrencies - Nathan McDonald

by Nathan McDonald, Sprott Money:

Over the past couple of days, Bitcoin and all other cryptocurrencies enjoyed a much-needed rally. Confidence was building once again and things were appearing to get back on track. The bull market was back on!

That is, until government officials and central banksters had their say.

Let me repeat something that I, and many others, have stated for years: The more successful cryptocurrencies become, the more of a threat they are to the establishment. The financial elite derives the majority of their power from an ability to endlessly print fiat money out of thin air.

This power is undeniably vast, and therefore it comes as no surprise to me that the eye of “Sauron” is now being turned on cryptos. This is a space they have been watching skeptically for some years now. The FED has kept a watchful eye—and so, too, have others.

This watchful eye has turned to “jawboning,” a common tactic used by central banksters the world over. They love this strategy, as it requires getting no blood on their hands. By simply speaking positively—or in this case negatively—about a market, they can send it either soaring or plummeting. We’ve witnessed this strategy countless times before, when they discuss gold, the markets, or interest rates. It just so happens they are now turning their sights on the hottest market any of us have seen in our lifetimes: cryptos.

One of crypto’s greatest assets is the fact they are not controlled by any one government; they are largely unregulated and de-centralized. As a result, all kinds of legitimate, dark and grey money flow into this space.

This has made countless millionaires out of small-time investors over the past year, many of whom are likely attempting to dodge the taxman any way they can.

Now, Bitcoin and other cryptos have suffered another major setback, falling 20% overnight due to continued crackdowns from China and increased hostility by South Korea, both of which make up an incredibly large portion of the global market for cryptocurrencies.

South Korea’s finance minister, Kim Dong-Yeon, even went as far as to state that a “cryptocurrency exchange shutdown is still an option” —an action that is already having dire consequences for the markets, even though it has not yet played out in actuality.

Central bankers the world over are now stuck between a rock and a hard place.

Do they:

A) regulate and clamp down on cryptocurrencies, sending them once again into the black market, where many will continue to be traded, albeit at short-term lower prices? Or do they:

B) allow cryptocurrencies to be embraced on the open markets, attempting to tax and regulate as much as possible—risking the possibility of cryptos overtaking their fiat money due to Gresham’s law

My guess is some countries will fully embrace the crypto space, hoping to become central hubs of trading in this market, as Wall Street and London are for the broader markets. While other countries, fearing the worst, will continue to ratchet up their rhetoric against Bitcoin and every other alt-coin.

However, there is a third scenario—the most sinister and frightening.

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