Why Bitcoin Hit a One-Year Low: Competition from Governments

Things have been relatively quiet on the cryptocurrency front for a number of months.

Since September, bitcoin (BTC) has been hovering around the $6,250–$6,750 range.

Wednesday brought a significant crash however, with 12% wiped off the currency in a day.

At time of writing BTC is trading at $5560.48, and seems to have halted its slide for now.

bitcoin coindesk graph

Source: coindesk.com

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Lagarde indicates support for digital currencies

In a move that could lead to greater competition in the cryptocurrency scene, Christine Lagarde, managing director and chairwoman of the International Monetary Fund (IMF), indicated support for central bank backed digital currencies.

She remarked that:

I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy.’

She continued:

This setup would be good for users, bad for criminals, and better for the state, relative to cash. Of course, challenges remain. My goal, at this point, is to encourage exploration.

This could be monumental news, if true.

Central banks want to force cryptocurrencies out

Central bankers have long been sceptical of cryptocurrency, seeing it as a platform for money laundering and speculation.

And yet, they realise the potential that it has, if only they could control it the same way they have controlled fiat currency.

Competition from government sources would naturally be a dampening factor on cryptocurrency prices as they would have the marketing capacity to get less tech savvy users on board.

Long-term, and this is speculative, there could be a schism whereby cryptocurrency users could be forced to convert their currency into a central bank backed digital currency.

For the moment though, such a scenario may be a long way off.

Regards,

Lachlann Tierney,
For Money Morning

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Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With an MSc from London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely.


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