The last time we wrote about the blockchain and Bitcoin, the cryptocurrency’s value was much higher than it is now. After shooting up to nearly $20,000, Bitcoin’s value slid downward week after week. Although the volatility of cryptocurrency means there’s no way to know for sure what’s coming next, it does appear that Bitcoin hit its bottom and is beginning to climb back up in value.
Why did Bitcoin’s value take such a big plunge? Spend just a little time on any relevant online forum and you’ll read dozens of theories. What’s clear is the value of crypto is very influenced by news cycles, which is why we want to highlight one story that likely hurt its value, along with another that seemed to boost it.
Visa and Mastercard May Be Threatened By Bitcoin
Visa, Mastercard and many other huge corporations are all embracing the concept of blockchain technology. What they don’t seem to be embracing is Bitcoin itself.
In a recent move, both card brands reclassified the way credit card purchases from crypto exchanges like Coinbase are processed on their networks. These transactions are now labeled as a cash advance rather than a purchase. Exact fees vary by institution, but what this means is that using a credit card will result in an additional 5 percent fee tacked on by the credit card merchant, in addition to the 4 percent credit card transaction fee already passed on by Coinbase.
On top of that increased upfront fee, cash advances do not fall under the standard interest-free grace period consumers expect for other credit card purchases. These transactions tend to carry significantly higher interest rates as well. Not surprisingly, this news was met with a lot of negative reactions from the crypto community.
The CFTC Gives Cryptocurrency the Thumbs Up
Given actions like those from Visa and Mastercard, there were plenty of concerns about the US government’s view of cryptocurrencies like Bitcoin. But on February 6, those concerns were mostly put to rest after the Senate Banking Committee heard testimony from the chairman of the Commodity Futures Trading Commission and the chairman of the Securities and Exchange Commission on the potential dangers of digital currencies as investments.
While SEC chairman Jay Clayton was more reserved, CFTC chariman Christopher Giancarlo seemed generally positive toward cryptocurrency. He said, “We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balanced response, and not a dismissive one.” He continued, saying, “It’s important to remember that if there were no Bitcoin, there would be no distributed ledger technology.”
He did make it clear that regulators are keeping a close eye on things like ICOs and various forms of potential scams that are springing up to ride the crypto wave. These and other statements seemed to be what the crypto community was hoping for, as Bitcoin’s price noticeably rose in the hours and days following the hearing.