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Cryptocurrency growth could destabilize Global Banking System: Basel Committee

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Cryptocurrency growth could destabilise the Global Banking System: Basel Committee
Source: Pixabay

The Basel Committee cautioned the global banking system that the growth of the decentralized currency industry could pose a serious risk to the economic and financial stability of the world.

Established in 1974 by the governors of the Group of Ten Central Banks, the Basel Committee on Banking Supervision [BCBS] concerns itself with the supervision of the world’s banking system. The committee keeps a regular check on the degree to which the world’s banks are exposed to the risk of volatile assets, in this case, digital assets.

In a March 13 statement, the committee stated that digital assets cannot be relied upon to replace the traditional structure of fiat currencies. Moreover, these assets are not a viable medium of exchange nor a store of value, according to the Basel Committee.

The report stated that the virtual currency industry posed a significant risk to the traditional financial world, primarily due to the volatile nature of the assets. Furthermore, threats related to liquidity, frauds, market manipulation, credit damage, money laundering, and terror financing were rampant in the crypto-industry.

However, the committee did admit that the banking world had “very limited” direct contact with the cryptocurrency industry. The committee went on to suggest that the crypto-industry should enhance its risk management protocols, to protect against its own volatility.

The statement read,

“The Committee is of the view that the continued growth of crypto-asset trading platforms and new [commercial] products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.”

On principle, cryptocurrency proponents do not want to merely compete with the global banking world, but want to replace them. Bitcoin [BTC], the top cryptocurrency in the market, was created as a mathematical-logical currency that was decentralized, and not under the power of one single issuing authority.

Government-issued fiat currency is seen as a product of the bureaucratic and financial elite, who aim to monopolize wealth. The crypto-industry aims to draw in more people to their movement, thereby replacing centralized, fiat currency.

Despite this principled belief, many see the cryptocurrency industry as any other investment vehicle, with higher volatility than most assets. Despite speculation and arbitrage not being the drivers of the crypto-industry, the committee seems to have viewed it that way.



It is this volatility, paired with unclear and uneven regulations of the industry, that have concerned the Basel Committee. Given cryptocurrencies’ fledgling status among stalwart investment fields, its surge in popularity, volatility, and lax-regulations, the Committee sees it as a direct threat to the stability of the global banking system.

The Basel Committee will be working closely with the Financial Stability Board to better manage the exposure risk of digital assets to other investment vehicles and the financial world, at large. The report concluded,

“The Committee will in due course clarify the prudential treatment of such exposures to appropriately reflect the high degree of risk of crypto-assets.”





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Bitcoin [BTC] surges above $5,500 and breaks major resistance level; collective market rises

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Bitcoin [BTC] surges above $5,500 breaking major resistance level; collective market surges
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Bitcoin [BTC] broke out of its sideways trend that saw coins fall after a brilliant start to April. This “break-out” is especially significant since it came days after the coin was trading sluggishly, pulling the market cap below $175 billion.

After breaking the $5,200 level on April 16, the coin held steady, showing no noticeable dips. However, it also began losing the momentum it had gained when it rose by 15 percent on April 2. Many saw the past week as Bitcoin losing steam, opining that a drop to as low as $4,000 would manifest. This pessimism coupled with the delisting dilemma saw the global market decline by 3.31 percent over the past weekend.

Given this backdrop, the present Bitcoin price incline was even more bullish for the collective market. Further, this was not just an effort to shrug off “sideways bears,” but instead, two key levels were broken in order to usher a collective market rise and sustain BTC bullishness.

Source: Trading View

RESISTANCE

The first, as indicated by eToro’s senior market analyst Mati Greenspan, was the resistance level of $5,350. When Bitcoin began to consolidate following the early April high, Greenspan stated that if the BTC price were to punch above the aforementioned level, it “would likely serve as confirmation that we’re pushing higher and will lead to further buying pressure.”

Greenspan stated that the $5,350 level acted as a major support level throughout 2018. Hence, it is incredibly important that Bitcoin surge above it in the next rise to consolidate buying pressure. Another important point to signal the coming of a bullish market was the 200-day moving average which Bitcoin has stayed above since the April 2 rally.

PSYCHOLOGY

The other significant level for the collective market is Bitcoin’s ascendance over $5,500, which it managed courtesy of this rally. Many, including Greenspan, pegged $5,000 as a key psychological level for the coin and hence, the rise above $5,500 less than three weeks after $5,000 was broken will bring back optimism to the BTC market.



Further, as was seen in the April 2 rise, the Bitcoin pump resulted in the king coin increasing its market dominance. At the close of March, Bitcoin was edging closer to losing the majority. However, the rally saw its share increase to 52.4 percent within a day. Following this recent 4.61 percent increase against the US Dollar, the king coin’s dominance increased to 53.2 percent.

Given the elasticity of the collective market to changes in Bitcoin’s price, the market was awash in green as Bitcoin broke the resistance and psychological levels. Amid this bullish charge, some coins stood out for their above-average gains, which included Bitcoin Cash [BCH], Cardano [ADA], EOS [EOS], Litecoin [LTC], and the exchange-ousted Bitcoin SV [BSV].





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