Crypto Crisis: Tesla Stops Accepting Bitcoin

[robynm09]

This thread is for the general discussion of the Article Crypto Crisis: Tesla Stops Accepting Bitcoin. Please add to the discussion here.

 

[Dheepa]

I’ll confess I’m not a crypto or trading expert. @Jacob Miller will probably have a much more solid technical analysis of the situation. What I do know however is that the drop in the crypto market is part of a necessary price correction.

Prices soared earlier this year because, despite existing regulatory concerns on money laundering and price volatility, there was a sudden mainstream acceptance of Bitcoin and other crypto assets (discussed here in slightly more detail). In my opinion, the price drop at the moment is not just the market’s return to the cautionary stance it had on crypto but is also a response to any wide spread interest in any new area: even more regulation.

• As this article discusses, Elon Musk backtracked on accepting Bitcoin payments for Tesla apparently due to wider concerns on the environmental cost of mining Bitcoin.
• Where previously the People’s Bank of China (PBOC) were heavily invested in creating crypto currencies of their own, they issued an unexpected warning against financial institutions offering crypto currency products or accepting crypto payment.
• A slightly lesser known point, but one that still led to a 5% decrease in Bitcoin’s value following the announcement, Biden announced new tax regulations on crypto currencies. Any transfer of crypto above the value of $10000 will have to be declared to the IRS

What does all this mean for law firms?

• While earlier this year it was fair to speculate an increase in transactional and advisory work from crypto related deals: Coinbase’s listing, ICOs, investment in Bitcoin futures contracts, advice on deploying crypto payment services, new regulation likely means most of this work will substantially slow down or stop completely for the time being.
• Instead law firms can expect more regulatory work than ever on this front especially with the new role environmental regulation will now have in this area. It’s important to bear in mind that technically, the mainstream interest in crypto hasn’t died down. Investment banks are already offering crypto services and payment service companies like PayPal and MasterCard are still going ahead with plans to allow crypto payments. I think the long term case for Bitcoin and crypto is still strong, it’s just a matter of how quickly regulation can catch up to address current concerns.
  

Thank you to @Asil Ahmad for his suggestion on discussing this topic for this week!

Going to leave everyone with a meme.

 

[Jacob Miller]

To be honest, there isn't a huge amount for me to add here.

From a technical perspective, my outlook hasn't substantively changed since we discussed this away back in February (wait... February was nearly four months ago?!?!). I do feel we're getting towards the point where the market is soon to bifurcate and many of the small 'bedroom crypto assets' will fall by the wayside as quickly as they popped up. This will only be accelerated by an increase in tax, regulation and legislation.
I've also long since been of the opinion that Bitcoin itself would need to drop significantly before more institutional money would pour into it, and large drops like this could be the beginning of that phase. I wouldn't be surprised to see a slight climb (maybe to the c.$45k mark) before another fall (a lot of technical reasoning here so I won't substantively get into it, but feel free to ask in the comments if you're interested).

Where my opinion has changed more since the discussion we had in February is the likelihood of any crypto asset becoming a mainstream currency. For a variety of reasons (again, I won't go into a huge amount of detail here as I could be here all week...), I no longer think this will become the case. More and more, I think crypto assets will become regulated more as a commodity than any other asset class and I can't see them becoming legal tender in any widespread way. I think you'll see an increasing number of places accepting crypto payments etc, but, in my opinion, this is very different from a mass scale proliferation of cryptos as the chosen tender across the world.

I completely agree with everything Dheepa has mentioned in regards law firm impacts and ESG considerations in terms of both commercial and legal implications for firms so don't really have anything to add in that area!

 

[Asil Ahmad]

I’ll confess I’m not a crypto or trading expert. @Jacob Miller will probably have a much more solid technical analysis of the situation. What I do know however is that the drop in the crypto market is part of a necessary price correction.

Prices soared earlier this year because, despite existing regulatory concerns on money laundering and price volatility, there was a sudden mainstream acceptance of Bitcoin and other crypto assets (discussed here in slightly more detail). In my opinion, the price drop at the moment is not just the market’s return to the cautionary stance it had on crypto but is also a response to any wide spread interest in any new area: even more regulation.

• As this article discusses, Elon Musk backtracked on accepting Bitcoin payments for Tesla apparently due to wider concerns on the environmental cost of mining Bitcoin.
• Where previously the People’s Bank of China (PBOC) were heavily invested in creating crypto currencies of their own, they issued an unexpected warning against financial institutions offering crypto currency products or accepting crypto payment.
• A slightly lesser known point, but one that still led to a 5% decrease in Bitcoin’s value following the announcement, Biden announced new tax regulations on crypto currencies. Any transfer of crypto above the value of $10000 will have to be declared to the IRS

What does all this mean for law firms?

• While earlier this year it was fair to speculate an increase in transactional and advisory work from crypto related deals: Coinbase’s listing, ICOs, investment in Bitcoin futures contracts, advice on deploying crypto payment services, new regulation likely means most of this work will substantially slow down or stop completely for the time being.
• Instead law firms can expect more regulatory work than ever on this front especially with the new role environmental regulation will now have in this area. It’s important to bear in mind that technically, the mainstream interest in crypto hasn’t died down. Investment banks are already offering crypto services and payment service companies like PayPal and MasterCard are still going ahead with plans to allow crypto payments. I think the long term case for Bitcoin and crypto is still strong, it’s just a matter of how quickly regulation can catch up to address current concerns.

Thank you to @Asil Ahmad for his suggestion on discussing this topic for this week!

Going to leave everyone with a meme.

View attachment 3364

This is a really good summary it is a lot more than I know and thank you for the mention.

 

[Asil Ahmad]

To be honest, there isn't a huge amount for me to add here.

From a technical perspective, my outlook hasn't substantively changed since we discussed this away back in February (wait... February was nearly four months ago?!?!). I do feel we're getting towards the point where the market is soon to bifurcate and many of the small 'bedroom crypto assets' will fall by the wayside as quickly as they popped up. This will only be accelerated by an increase in tax, regulation and legislation.
I've also long since been of the opinion that Bitcoin itself would need to drop significantly before more institutional money would pour into it, and large drops like this could be the beginning of that phase. I wouldn't be surprised to see a slight climb (maybe to the c.$45k mark) before another fall (a lot of technical reasoning here so I won't substantively get into it, but feel free to ask in the comments if you're interested).

Where my opinion has changed more since the discussion we had in February is the likelihood of any crypto asset becoming a mainstream currency. For a variety of reasons (again, I won't go into a huge amount of detail here as I could be here all week...), I no longer think this will become the case. More and more, I think crypto assets will become regulated more as a commodity than any other asset class and I can't see them becoming legal tender in any widespread way. I think you'll see an increasing number of places accepting crypto payments etc, but, in my opinion, this is very different from a mass scale proliferation of cryptos as the chosen tender across the world.

I completely agree with everything Dheepa has mentioned in regards law firm impacts and ESG considerations in terms of both commercial and legal implications for firms so don't really have anything to add in that area!

Really great summary