The current year has not been fruitful for the crypto market as cryptocurrencies have seen a massive price decline. Even some digital currencies are 90 percent down compared to their all-time high. Much of this is caused by emerging problems and tighter economic policies worldwide. However, several crypto-specific factors enhanced its impact. For instance, it was revealed that many cryptocurrency lending platforms were putting investors’ money into enormous risks to pay out handsome returns. Unfortunately, it was feasible for the good times only.
The year 2022 has shown crypto investors how volatile this industry is. It is one thing to learn that these investments contain potential risks; it is another to see a reputable crypto ecosystem collapse in front of our eyes, wiping out billion-dollar investments. In the end, after nine months of peak price action, the threat is whether more such circumstances will appear. Nobody knows about the future, but due to constant economic hardships, the industry will face two major threats. It is the shape of regulation and the unpredictable foundation that supports the largest Stablecoin in the crypto world.
- Arrival Of Tighter Regulations
The danger related to regulations is so much in the talks that it has adopted the shape of a fictional boogeyman. But this is not an ambiguous image; strict regulations are on their way, and when they arrive, they will have a huge impact on the prices of cryptocurrencies in both the short and long term. The current month is crucial in this regard since numerous orders and responses by American president Biden on cryptocurrencies are due.
In March, the Executive Order provided 180 days to various authorities to submit a response on the crypto and blockchain-related key issues in the United States. These reports are not the final framework, but they will be sufficient enough to provide an idea about what is in the stores. Concentrate on specific information around whether crypto exchanges would be restricted to obey certain laws to stock brokers and whether cryptocurrencies will follow similar rules to equities.
Besides this, you also have to pay attention to other areas, such as the possibility of the US government developing a digital dollar and the procedure it would follow to govern and control the Stablecoins. The beginning response to Biden’s Executive Order was favorable, but it is the depth that matters the most, and it will become transparent and comprehendible soon. Proposals for heavy-handed regulations could pile more problems on the already struggling sector of crypto.
- Lower Chances Of Tether Being Tethered
Tether is known as the biggest Stablecoin in the crypto world, and according to the Market Cap, it stands in the third position in the list of cryptocurrencies with Bitcoin at number one – the most valuable cryptocurrency. Tether plays an important role in crypto and accounts for a large portion of crypto trading, although other Stablecoins have gained some market share. Stablecoins are cryptos whose value is pegged to any commodity like gold or the US dollar. The Tether must have one dollar reserve for every USDT token. In this way, it retains its peg. The problem is that it is not very clear how it keeps those reserve dollars.
Tether is no stranger to analyzing its holdings. The USDT has been sanctioned in NY following an investigation by the Attorney General. While imposing the ban, she said that Tether’s claim about its digital currency being completely backed by the US dollar is just a lie. In addition, a fine of 18.5 million dollars was also announced. Many investigative journalists have attempted to find out more information about where it holds its funds. Recently, the Wall Street Journal revealed that a 0.3 percent decline in assets could technically bankrupt Tether. Tether called the article “a series of unconfirmed findings.” Likewise, this slim margin for error indicated that it would not take much turmoil or investor uncertainty to destabilize the Stablecoin giant.
Knowing The Risks
Crypto regulation may move sluggishly, and Tether may be able to keep up. But these two are dark clouds on the crypto horizon. There are chances of price decline, and investors are required to be prepared for it. Only put what you can afford to lose, and do not suppose that cryptocurrencies have the same shield as stocks or funds in the banks.