The unstoppable force known as Bitcoin seems to have finally crashed into an immovable object, at least in one small (minded) part of the world. Citing the possibility of “irreparable” damage and transaction risks, the central bank of Turkey has banned cryptocurrency.
Tayyip Erdogan struck again, firing the central bank governor and installing a puppet to co-sign his paranoid delusions about modern technology. In their minds, the move will revitalize a fiat currency that was faltering long before Bitcoin came on the scene. Good luck guys.
Meanwhile, in India, where you can buy 75 Rupees for one US dollar, Prime Minister Narendra Modi is pushing a bill to criminalize possession, issuance, mining, and trading of any kind of crypto assets. His minions have even gone on record for calling crypto a “Ponzi scheme.”
Personally, I’d like to thank both of these intellectually challenged world leaders. Their shortsightedness has put the conversation about crypto regulation front and center. We all knew it was coming at some point. Now we’re here. Let’s look at the potential impact.
Biden Administration is Developing Crypto Regulation
I’m not a huge fan of government regulation, but something tells me this movement will help protect crypto developers and asset holders. New SEC boss Gary Gensler and Treasury Secretary Janet Yellen have been tasked with developing a regulatory framework.
The administration as a whole is widely viewed as a friend to digital assets. Professor Gary Gensler teaches cryptocurrency at MIT. Janet Yellen, though outspoken about the use of crypto in illegal activities, has also said it could “improve the efficiency of the financial system.”
Wally Adeyemo, the deputy Treasury secretary, will run point on developing the regulations. As a former senior advisor and asset manager at Blackrock, he’s unlikely to recommend any move that slows down the workings of a free market. He’s well-known for advocating the opposite.
It’s the next step in crypto evolution. With Tesla (TSLA) and PayPal (PYPL) now all-in on Bitcoin, and Coinbase (COIN) scoring a $100 billion valuation, the US government wants their piece of the pie. In this country, regulation means taxes and fines, not irrational trading bans.
Crypto Prices Plummet after Turkish Announcement
There’s no elephant in this room. The price of Bitcoin (BTC) went from breaking $63K on April 15th to just under $53.5K three days later. Some of that was due to Erdogan’s ban, but not all of it. There’s always a sell-off when an asset hits a historic high. I’m sure that contributed.
Ethereum (ETH), which was trading at $2542 on April 15th, also took a hit, dropping to $2054 on the 18th, but they’ve already rebounded. They closed at $2410 this afternoon (4/21). Bitcoin also appears to be on the rise, with a price over $55K though most of the day today.
As for Coinbase (COIN), they hit a high of $342 on April 16th and they’ve been dropping ever since. You can blame that on crypto market disruption if you want to. I’m going with “overvalued” as my explanation. I’m not buying yet. The price is far too high.
Being a major (in my mind) investor in Bitcoin, I suppose I could whine about how this situation cost me money, but it didn’t. I started buying last year and haven’t sold any of it, even after the ban. Hopefully you did the same. I’m still betting on Bitcoin to break $100K this year.
Balance Your Portfolio to Offset Crypto Volatility
A few months back I put together a short list of three consumer staples stocks that I thought would do well during the economic recovery. Interestingly, all three of them surged when Bitcoin fell. They’ve actually been on a steady uptrend since March 1st.
The first of these is PepsiCo (PEP). They were trading around $130 last month and have since jumped to $147. Costco (COST) did even better. They increased from $311 to $374. The third member of my trifecta, Procter and Gamble (PG), went from $122 to $137.
Balance is an often-overlooked concept for self-directed investors and traders. I’ve never been shy about my bullishness in the crypto market, but I also don’t rely on it exclusively. Diversity saved me this week. Overall, the Bitcoin losses were easily offset by gains in other sectors.
As more of the Biden economic agenda is revealed, it’s important to reevaluate investments across the board. That includes 401(k)s and IRAs. Next week, I’ll delve into high-paying dividend stocks and how reinvested dividends can help boost retirement savings.
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