Cryptocurrencies once again attract regulators' attention

Bitcoin has once again slipped below the psychological $30,000 level and is struggling to hold on to key support. Meanwhile, investor concerns and controversy over regulation of the cryptocurrency market are growing. The De-Fi or decentralized finance trend that has been popular in this bull market has created sophisticated digital instruments that were not available during previous cryptocurrency bubbles and which regulators will be looking at:

• In the cryptocurrency world, lending, betting or even investing in 'stock-mimicking' assets have become popular;

• Also gaining popularity were so-called yield farming protocols, which, as in the case of Anchor built in the Luna ecosystem, enabled up to 20% returns on passive investments and were supposed to be a 'safe haven' for investors in the event of a cryptocurrency market decline;

• The situation in the Luna/Terra ecosystem i.e. the complete collapse of stablecoin UST and Anchor Protocol is already being compared to the Lehman Brothers bankruptcy of 2008 and will have consequences for the entire cryptocurrency industry;

• U.S. Treasury Secretary Janet Yellen reacted to the collapse of the third largest stablecoin on the market TerraUSD and announced the creation of regulations for this type of cryptocurrencies by the end of 2022;

• The spectacular collapse of cryptocurrencies associated with so-called 'allogrytmic stablecoins' like Luna/Terra and Waves has made regulators in the near future likely to also focus their attention on the remaining, more conventional stablecoins USDC, BUSD and USDT, which will make up a huge portion of the overall market during a possible downside scenario. Many investors will look for stability in cryptocurrencies that reflect the exchange rate of the US dollar, among others;

• The largest stablecoin Tether (USDT) has repeatedly caused financial scandals and concerns among market participants in the past due to its low coverage in the physical dollar;

• Stablecoin USDC created by Circle declares full collateral, as does BUSD created by the Binance exchange. Both projects regularly report their reserves in US dollars;

• Charles Hoskinson, the creator of the Cardano cryptocurrency, recently spoke on the health of the crypto market. According to Hoskinson, the cryptocurrency market has entered a bull market, and during such periods nothing is permanently raising the price of the project he built. Cardano, however, is not an isolated case, massive declines are today scored by almost the entire market;

• Cryptocurrencies similarly to stock indices retreated after a weak reading of CPI inflation data from the US. The report confirmed an increase in inflation in important sectors, which may be a signal for the Fed to tighten monetary policy even more strongly;

Bitcoin, D1 interval. Bitcoin price is falling and is at the level of important support, which coincides with the lows of the summer of 2021 and 61.8 Fibonacci retracement. If demand continues to retreat, the next significant support is at $22,000 where the 71.6 Fibo retracement is located. Source: xStation5

We can see a chart of the two-session average, which is often used to determine trends. Below it, bitcoin slipped after each of the previous uptrend cycles ended and then responded with strong demand. Currently, the average is near $22,000 and overlaps with the 71.6 Fibonacci retracement Source: lookintobitcoin.com