Značka: stablecoins

Does a Fed digital dollar leave any room for crypto stablecoins?

During Jerome Powell’s Jan. 11 United States Senate confirmation hearings, Sen. Patrick Toomey posed a question to the incumbent-and-future Federal Reserve chief: “If Congress were to authorize and the Fed were to pursue a central bank digital dollar, is there anything about that that ought to preclude a well-regulated privately-issued stablecoin from co-existing with a central bank digital dollar?”“No. Not at all,” the central banker answered — a response that surely brought some relief to the crypto community. At least the Fed wasn’t seeking to ban stablecoins. That bullet had apparently been dodged.But, Toomey raised a significant and abiding question: Can stablecoins and a Federal Reserve digital dollar really coexist? If individual Americans were to have retail accounts with the Federal Reserve — as Toomey posited in what may have been an exaggerated scenario — “and the Fed becomes the retail banker to America,” why does one even need stablecoins? Or traditional retail banks for that matter? Indeed, in a discussion paper released on Jan 20, the Fed cited various potential risks associated with a digital dollar, including that a CBDC could effectively replace commercial bank money. That paper was aimed at eliciting public comment, while elsewhere the Fed has indicated no interest in rushing out a digital currency despite the efforts of other countries like China.Not all assumed the two could co-exist. “A widely and easily accessible digital dollar would undercut the case for privately issued stablecoins,” Eswar Prasad, professor of economics at Cornell University and author of the book, The Future of Money, told Cointelegraph, though “stablecoins issued by major corporations could still have traction, particularly within those corporations’ own commercial or financial ecosystems.” Others envisioned separate and distinct use cases for stablecoin and central bank digital currencies, or CBDCs, a group that would include a future U.S. digital dollar. “There are definitely some distinct use cases for each,” Darrell Duffie, Adams distinguished professor of management and professor of finance at Stanford University’s Graduate School of Business, told Cointelegraph. “For example, the Fed is unlikely to give CBDC accounts to a wide spectrum of foreign consumers,” and dollar-pegged stablecoins could be very useful for making cross-border payments and settlements — fulfilling a real business need, he suggested. Distinct purposes?Would there, indeed, be distinct uses for a digital dollar and privately issued stablecoins — or are stablecoins likely to be superseded by CBDCs all around the world eventually? “Stablecoins are different from most CBDCs in their construct and purpose,” Matt Higginson, a McKinsey partner who leads the consulting firm’s global blockchain and digital assets initiatives, told Cointelegraph. CBDCs are usually intent on improving financial inclusion, reducing the cost of cash and, to some degree, tracking financial transactions (for Anti-Money Laundering purposes, for example). Stablecoins, by comparison, are dollar-pegged tokenized cash aimed at improving the speed and efficiency of payments. “Their premises are really quite different, so there is no reason they shouldn’t co-exist,” said Higginson.A digital dollar isn’t really about technology or efficiency, Jonas Gross, chairman of the Digital Euro Association, told Cointelegraph. As with CBDCs generally, it “could be more efficient or stable for handling a high throughput of retail transactions, where DLT is not needed, or where people prefer the safety, soundness and interoperability of a central-bank backed currency.”Stablecoins, in comparison, “focus on the technological aspects, allow efficient payments due to removing intermediaries and novel innovative business models,” Gross said. The two could find different constituencies and could presumably co-exist. Some countries, too, might prefer to dollarize their economies with a USD stablecoin, Duffie added. “And, some might get dollarized against the wishes of their central banks.” Not all CBDCs need to be blockchain-based or based on digital ledger technology, either, as Duffie noted, further explaining:“Suppose a CBDC is not based on DLT, and we want to take advantage of smart contracting or other DLT applications, whether wholesale or retail. Stablecoins could serve a useful role there.”Even Prasad didn’t rule out the possibility of coexistence: “Stablecoins and central bank digital currencies could be seen as complementary payment mechanisms, even if they might step on each other’s toes in that function.” A change of heart?At his confirmation hearing, Powell appeared to be more kindly disposed toward cryptocurrencies than in July 2021 when he told lawmakers: “You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies, if you had a digital U.S. currency,” using that as an argument in favor of a Fed digital dollar. What might have prompted this sea change, assuming that’s what it was? “U.S. institutions, such as the Fed and regulators, seem to have understood that stablecoins can provide tremendous support for the U.S. dollar,” opined Gross. Why? “The largest stablecoins are all backed by the U.S. dollar,” and if they were to strengthen their position as a means of payment in the crypto space, “this means that the U.S. dollar gains in importance.”Prasad had another take as the Fed chair’s softer stance on stablecoins might be the result of “him having taken comfort from actions under consideration by Congress and various regulatory agencies to bring such private cryptocurrencies under tighter regulatory oversight.” Subverting monetary policy?Crypto critics have even suggested that popular stablecoins might eventually undercut traditional monetary policy operations. Are they right? “If denominated in U.S. dollars, with stability, I don’t see a case that a stablecoins would undermine monetary policy transmissions,” said Duffie, adding: “Actually, I would draw the opposite conclusion.”Prasad differed: “Stablecoins that undermine the medium-of-exchange function of central bank money could add to already substantial uncertainties in the transmission of monetary policy to economic activity and inflation.”Higginson, for his part, viewed the notion that stablecoins could affect monetary policies as misguided. “Stablecoins are almost fully reserved,” which means a real dollar is set in reserve for almost every tokenized stablecoin dollar, he said, further telling Cointelegraph: “The obvious conclusion to that is that it doesn’t change monetary policy at all because you are not changing the supply of dollars in the economy.” “Retail banker for America?”Lastly, Sen. Toomey raised a scenario during the confirmation hearings whereby “individual Americans [would] have retail accounts with the Fed, and the Fed becomes the retail banker for America.” Both he and Powell agreed that this role would be well beyond the “history, expertise, experience or capabilities” of the U.S. Federal Reserve. Still, is such a role unthinkable?“Historically, central banks have stayed away from having direct retail relationships,” Higginson told Cointelegraph. “That’s why our commercial banking system exists.” Central banks rarely issue currency directly to consumers, for instance. Related: Early birds: U.S. legislators invested in crypto and their digital asset politicsMoreover, the properties of stablecoins are different from those of most current or projected CBDCs “in that, stablecoins are being launched with this smart contract functionality that makes them programmable,” continued Higginson. This opens possibilities for their use that go beyond what we think about in terms of a traditional central bank digital currency. Nevertheless, the idea of “retail banker to America” may not be so easily put to rest. A recent EY report, for example, summoned up the same circumstance — indeed, describing a CBDC that took consumer deposits as “an existential threat” to financial services firms, including retail banks. Wrote EY: “If customers can keep their money with a central bank, they have no need for a retail bank, and firms will see their interest rate margins contract precipitously.”Still, nothing is for sure. “The Presidents’ Working Group Report on Stablecoins tells us that the path to the introduction of useful and compliant stablecoins is far from clear,” said Duffie, concluding: “Legislation may be needed, and that’s not an easy or predictable matter.”

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FTX exchange floats $1M prize for banks to accept stablecoins

Cryptocurrency derivatives exchange FTX is calling on banks to reach out and discuss the possibility of accepting stablecoins in exchange for a $1 million reward.In a Tuesday Twitter post, FTX said it was exploring forming relationships with banks in different regions to allow users to have “near-instant and near-free deposits and withdrawals” through stablecoins. The exchange floated the idea of offering a $1 million prize for the first bank in each region to accept the tokens but hinted it would be open to giving more.How much would it cost to convince a bank to accept stablecoins? If we offered a $1m prize for the first bank in each region that does it is that enough?Do you work for a bank and want to discuss this?— FTX – Built By Traders, For Traders (@FTX_Official) December 28, 2021The pitch to the exchange’s more than 350,000 Twitter followers came following FTX CEO Sam Bankman-Fried, or SBF, suggesting additional regulatory clarity was needed for the crypto space — including stablecoins — to move forward as an industry. According to the CEO, creating a “reporting/transparency/auditing based framework” to confirm how the coins are backed would “solve 80% of the problems while allowing stablecoins to thrive onshore.”FTX said it aimed for an audience including but not limited to U.S. banks in calling for an agreement on stablecoins, and would be open to speaking to credit unions. The exchange is incorporated in Antigua and Barbuda and headquartered in The Bahamas but also operates FTX US for U.S. users. “We just acquired a bank and this is a good idea,” said Oliver von Landsberg-Sadie, CEO of the London-based BCB Group. “No prize required by us, you are already a client of ours, and we all gain in the long run.”Related: Regulators are coming for stablecoins, but what should they start with?This year, many U.S. regulators have turned their attention to stablecoins, with The President’s Working Group on Financial Markets releasing a report in November suggesting that issuers should be subject to “appropriate federal oversight” akin to that of banks. Nellie Liang, the Undersecretary of the Treasury for Domestic Finance, has also hinted at additional laws affecting the coins.

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US Treasury official beckons new stablecoin regulations

The United States Treasury made further hints at new laws for stablecoins on Dec. 17. Nellie Liang, the Under Secretary of the Treasury for Domestic Finance, fueled more stablecoin regulation speculation with comments on investors ‘potentially big risk’ when using stablecoins. Following on from the Financial Stability Oversight Council November 2021 report on stablecoins, the top official for financial oversight at the U.S Treasury stated that “If Congress does not enact legislation, the regulators will try to use what authority they have.”The Treasury has limited powers as broad strokes stablecoin regulation is not possible without the backing of a congressionally mandated authority. “They can do a little here and a little there, but if these are foundational to crypto assets and they aren’t stable, that could potentially be a big risk,” Liang stated of regulators’ powers.The preferred choice of leverage users and scalpers, stablecoins help traders get in and out of crypto assets. Tether (USDT), the largest stablecoin at over a $75 billion market cap, has been put under the microscope several times.In the most recent report in March this year, Moore Cayman, a Cayman Islands-based accounting network, affirmed that Tether Holdings Limited’s USDT stablecoin tokens are fully backed by its reserves. However, its widespread use continues to raise concerns among policymakers.Regulators claim that investor runs on stablecoin could wreak havoc on the market, while the sheer size of a market collapse could upset traditional financial markets if such a run took place. As a result, commentators such as Mark Cuban saw 2021 as the year of stablecoin regulation.Liang’s comments indicate that congress and the treasury may be at loggerheads when it comes to stablecoin regulation. In the November report, the Financial Stability Oversight Council stated that it is prepared to take steps on its own to address stablecoins if Congress fails to pass legislation.Her comments echo those of Federal Reserve Chairman Jerome Powell. At the Federal Market Open Committee (FOMC) meeting last Wednesday, he stated that “Stablecoins can certainly be a useful, efficient, consumer-serving part of the financial system if they’re properly regulated. And right now, they aren’t.”Related: Senate hearing on stablecoins: Compliance anxiety and Republican pushbackCongress, however, remains divided. Senator Elizabeth Warren of Massachusetts has a hard-nosed approach; “Stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late.”In contrast, Senator Pat Toomey for Pennsylvania welcomes stablecoins as an “exciting new technology that creates opportunities for faster payments, expanded access to the payment system, programmability, and more.”Curiously, proponents of Bitcoin (BTC) and cryptocurrencies as a whole would argue that any regulation of the stablecoin space is a case of shutting the stable door after the horse has bolted. Dylan LeClair, a prominent Bitcoin analyst, claims that stablecoins are “preferred collateral for bulls,” which is “good to see.”Furthermore, Alex Gladstein, Human Rights Foundation chief strategy officer tweeted that “Stablecoins are a bridge to a near future where Bitcoin users can-if they wish-peg holdings to any currency on mobile apps in a non-custodial non-KYC way outside the banking system, without needing altcoins, with instant global cheap payments.” In this sense, stablecoins are a stepping stone to broader Bitcoin adoption.

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US Financial Stability Oversight Council identifies stablecoins and cryptos as threats to financial system

In an annual report published on Friday, the United States Financial Stability Oversight Council, or FSOC, voiced its concern over the adoption of stablecoins and other digital assets. Regarding stablecoins, the FSOC said consumer confidence could be undermined by factors such as illiquidity, lack of appropriate safeguards, opacity regarding redemption rights, and cyber attacks. “A run on stablecoins during strained market conditions may have the potential to amplify a shock to the economy and the financial system,” the report said.The report also alerted to developments in decentralized finance, or DeFi, where the use of high leverage could trigger a fire sale when the price of the underlying asset declines. This would result in a cycle of margin calls and further price declines. In addition, the report outlined that “users of these services face risk of loss due to market value fluctuations, operational issues, and cybersecurity threats, among other risks.” In the report’s recommendations, the FSOC calls for a unified effort between federal and state authorities to enact legislation on stablecoins and digital currencies.[embedded content]Related: SEC delays decisions on Bitwise and Grayscale’s Bitcoin ETFsDespite concerns surrounding the much-unregulated nature of the crypto industry, the report highlighted their innovative potential:The development of digital assets and the use of associated distributed ledger technology may present the opportunity to promote innovation and further modernization of financial infrastructure. Regulatory attention and coordination are critically important in light of the quickly evolving market for digital assets.

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Cointelegraph Editor-in-Chief Kristina Cornèr talks digital currencies with Mastercard at Global Impact Week

Global Impact Week, an industry event which features fintech, policy, climate, healthcare, and media innovations, kicked off in Valencia, Spain, and is ongoing from Dec. 14 to 18. Recent figures put attendance at 100,000, with 500 speakers and 150 live sessions. Cointelegraph’s Editor-in-Chief Kristina Cornèr has been in virtual attendance at the event, moderating the panel titled Fireside Chat: Fintech Defining the Future with Mastercard’s executive VP of market development Liza Oakes. Here’s what they had to say:Kristina Cornèr: In November, Mastercard announced the launch of crypto-funded payments cards. How do you see this opportunity develop in the next few months or years?Liz Oakes: We started the service in fiat money. You can start by using Mastercard to purchase crypto where allowed and cash out into fiat money again. That was the first step of the development, figuring out a gateway from fiat into crypto safely. And the second stage is the topic of clearing settlements for potentially hundreds of cryptocurrencies. Moving forward, we are looking at CBDCs, stablecoins, and how to support their developments.KC: What other experiments is your firm developing regarding crypto, such as NFTs, payments in the Metaverse, etc.?LO: Personally, I’m fascinated by NFTs, but I also recognize there’s an enormous security challenge. The answer to this, which is still in development, cannot be that of cashing-out to a non-connected physical location.KC: How do you see new developments playing a role in financial inclusion?LO: I think I read the statistics the other day that 1% to 2% of the entire [world population] has participated in crypto. So there’s a lot of money in it, but it’s a very, very low percentage demographic who feels they can actually participate. So it’s a long way to go, and we are not quite there yet.

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Fed chair Jerome Powell says he isn't concerned about crypto disrupting financial stability in the US

United States Federal Reserve chair Jerome Powell hinted that though the government agency should consider monitoring developments in the crypto space, he didn’t see cryptocurrencies as a financial stability concern for U.S. markets.Addressing a question on crypto from Michael Derby of the Wall Street Journal on Tuesday, Powell supported the conclusions of a report from the President’s Working Group on Financial Markets released on Nov. 1. The report proposed that stablecoin issuers should be subject to “appropriate federal oversight” akin to that of banks, legislation that was “urgently needed” to address risks.“Stablecoins can certainly be a useful, efficient consumer-serving part of the financial system if they’re properly regulated,” said Powell. “Right now, they aren’t. They have the potential to scale, particularly if they were to be associated with one of the very large tech networks that exist.” Jerome Powell speaking at a Tuesday news conferenceThe Fed chair added:“You could have a payment network that was immediately systemically important that didn’t have appropriate regulation and protections. The public relies on the government and the Fed in particular to make sure that the payment system is safe and reliable.”Powell seemed to be backing the Biden administration’s most recent position on digital assets in advance of his Senate confirmation hearing to be the next Fed chair. Having served on the Fed’s board of governors since 2012 and as chair since 2018, Powell is the U.S. President’s pick to serve in the same role until 2026.Related: Fed still undecided about digital dollar, says Chair Jerome PowellThough the Fed chair said that crypto was likely not a financial stability concern for the U.S. at the moment, he still described digital currencies used as speculative assets as “risky” and “not backed by anything.” Powell has previously stated his concerns about crypto — adding he would not be in favor of banning the assets the way China has — while voicing the need for regulation of stablecoins.“Stablecoins are like money market funds, they’re like bank deposits, but they’re, to some extent, outside the regulatory perimeter, and it’s appropriate they be regulated,” said Powell in September. “Same activity, same regulation.”

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Frax co-founder Sam Kazemian believes stablecoin regulations are currently too harsh

Stablecoins, or crypto assets which peg their value to less volatile fiat money, are useful tools for a variety of reasons. They can be used to cash out crypto investments, send or receive stable money abroad, and to pay for everyday consumer transactions without fear of fluctuation. A recent estimate from the Bank for International Settlements, or BIS, put the total stablecoin supply at roughly $150 billion.But central banks, the issuers of traditional fiat money around the globe, do not seem to be big fans of stablecoins. A sharp increase in supply coupled with a lack of relevant regulations has led to concerns that these stable blockchain assets could threaten the current financial order. Fiat money stablecoins, such as those created by Circle (USDC) and Tether (USDT), may require banking licenses in the future to operate. Thus far however, regulators have not been keen to take aim on algorithmic stablecoins, which are governed by automated expansion and contraction of the monetary supply.In an exclusive interview with Cointelegraph, Sam Kazemian, the co-founder of the Frax stablecoin protocol, discussed the regulatory outlook for the sector and algorithmic stablecoins in detail.Growth in cryptocurrency activities | Source: BIS Cointelegraph: There are many algorithmic stablecoins out there, such as Terra USD, Ampleforth, etc. In your opinion, what makes Frax unique?Sam Kazemian: What makes Frax unique is that we have a system where our protocol expands and contracts supply in various places across blockchain protocols, and targets the exchange rates of the Frax stablecoin out in the open market. We like to compare it to a central bank. When it issues a currency, it never says ‘hey, you can come to redeem it for this amount of gold, or you can come and redeem it at the central bank for something dollar-pegged.’ They don’t say that anymore. And so, what a central bank does, is that it targets their currency in the open market’s exchange rate.If a central bank pegs their currency to gold, what they’ll do is look at the price of gold against their national currency. If it’s lower than what they want, they’ll buy some of the currency back. If the other side is higher than what they want, then they’ll print more of the currency. Frax takes this kind of approach. That’s how we developed our algorithmic stablecoin thesis, and it’s worked well. We’ve never broken our peg, even during [the major market crash in] May.Stablecoin market capitalization statistics | Source: U.S. Treasury Stablecoin ReportCT: Do you see a potential crackdown looming in stablecoin the sector? And what is Frax doing to comply with relevant stablecoin regulations?SK: There are two parts to this. I don’t know if I would call it a crackdown, but I do see a lot of regulation coming for at least the fiat coins, which have traditional financial assets that back them; like cash equivalents, or actual cash in depository accounts. I don’t know that this affects truly decentralized stablecoins though. I believe that Frax is not only compliant, but it will keep complying with all requirements just by existing and being fully decentralized.The second part to your question is interesting because I think the current stablecoin regulation they’re proposing is a little bit reactionary. What’s currently going on is that people are saying that stablecoin issuers like a Circle and Tether need to have banking licenses. That’s the conversation. But that doesn’t make sense if you think about it, because there’s a lot of experimentation allowed in even the traditional financial space. Things like money market funds don’t have a banking charter. It’s not a bank. It’s not FDIC [Federal Deposit Insurance Corporation] insured. People either don’t realize this or they’re not informed.Money market funds are regulated in the sense that you need to have [and disclose] cash equivalents. But they are not regulated with the same harshness that they’re currently proposing [for] stablecoins. This doesn’t apply to fully decentralized ones like Frax that have absolutely no claims on real-world assets, or even advertise any form of redeemability. The whole point of Frax is that our protocol works by targeting the open market exchange. I think I’m pretty open to the belief that the regulation portion will work itself out.

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Japan's financial regulators may propose legislation in 2022 restricting stablecoin issuance

According to The Nihon Keizai Shimbun (Nikkei), one of the world’s largest financial newspapers and the entity behind the Nikkei 225 stock index, Japan’s Financial Services Agency, or FSA, will propose legislation next year restricting stablecoin issuance to only bank and wire transfer companies. Theoretically, this would prevent entities such as Tether (USDT), which does not operate as a bank and is only regulated in the British Virgin Islands, from conducting business with Japanese customers.However, the new proposed rules would only affect some stablecoin issuers. For example, USD Coin (USDC) issuer Circle plans to become a crypto bank chartered in the United States amid a regulatory crackdown. While operating as private companies alone, stablecoin issuers are typically exempt from financial reporting, auditing or regulatory oversight, leading to notable speculative claims that Tether may not have enough reserves to back USDT.In addition, the FSA also plans to toughen regulations in areas such as preventing transfers of criminal proceeds, verifying user identities and reporting suspicious transactions for both stablecoin issuers and wallet providers.Private stablecoins, however innovative, compete directly with central bank digital currencies, or CBDCs, and their adoption. In Japan, the central bank plans to roll out the digital yen, dubbed the ‘DCJPY,’ by the end of next year. It is supported by a consortium of nearly 70 companies, including the country’s largest financial institutions, which have all joined in on a trial of the DCJPY. There is currently a stablecoin digital yen in circulation, called the ‘GYEN”, and another pending launch backed by Circle.

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Fed's Quarles says regulators should show 'constraint' on stablecoins to avoid hampering innovation

Speaking publicly for the last time as a member of the Board of Governors of the Federal Reserve System, Randal Quarles urged regulators to exercise restraint on stablecoins.In a prepared statement for his speech at the American Enterprise Institute on Dec. 2, Quarles expressed concern that regulations could hamper innovation in the digital asset space, particularly when it comes to stablecoins. According to the Fed governor, some of the approaches on stablecoin regulation from the President’s Working Group on Financial Markets’ November report are unnecessary, including “limiting wallet providers’ affiliation with commercial entities.”“It is one thing to say that a stablecoin issuer itself must be a regulated bank — I think that is probably overkill, as there are perfectly effective ways for nonbanks to meet our legitimate regulatory concerns, but there is at least a clear relation between the existing framework of bank regulation and the specific measures that stablecoin issuers must address to operate safely,” said Quarles. “It is, however, quite another thing to contemplate that wallet providers may need to be completely separated from commercial firms.” The fed governor added:“It is not at all clear what regulatory interest would be furthered by such a limitation, which is much more restrictive than we require for nondigital assets.”On Nov. 8, Quarles resigned his position at the Federal Reserve where he had been serving since 2017. He will remain on the Board of Governors until the end of December, at which point there will likely be three open seats for the group of seven regulators. During his time at the Fed, Quarles said that federal agencies needed to consider the right regulatory approach before creating a framework to oversee the crypto market. Prior to the 2017 bull run, he claimed that wide-scale usage of cryptocurrencies could pose “serious financial stability issues,” suggesting that the government partner with banks to create solutions for digital payments.“While digital asset-related activities may be novel, regulators need not treat these activities differently simply because of the nature of the technology,” said Quarles in his Thursday speech. “We must focus with care on the unique risks posed by these activities and avoid unnecessarily impeding their promise.”Related: Biden is considering law professor, Fed president, and former CFPB director to fill 3 seats on Federal Reserve: ReportU.S. President Joe Biden has not yet announced his picks for the Fed’s empty seats, but said in November he planned to nominate replacements with a focus on “improving the diversity in the Board’s composition.” He has already said Jerome Powell is his pick to remain Fed chair after his first term expires in February, with governor Lael Brainard to serve as vice-chair after the departure of Richard Clarida.

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Victory is for the taking in Friday’s $950M Bitcoin options expiry

Bitcoin (BTC) price is down this week, and naturally, bears will always find some reversal signal whenever the price shows strength, such as the 8% gain on Nov. 28. Of course, technical analysis is not an exact science, so there is a margin for interpretation and most traders look at multiple timeframes to find a narrative that suits their bias. Currently, BTC price is in a descending channel that started on Oct. 31, and if this pattern plays out, Bitcoin could drop to $50,000 in the short term.Bitcoin/USD price on FTX. Source: TradingViewCryptocurrency markets crashed on Nov. 26 after concern over a new COVID-19 variant sparked a global market sell-off. As Bitcoin dipped below $54,000, bears saw a $215 million potential profit on Dec. 3’s options expiry, but that changed after BTC price regained the $57,000 support.Furthermore, regulatory concerns coming from the United States continue to pressure the market. On Nov. 24, the U.S. Senate Banking Committee chair sought information from stablecoin issuers and exchanges by Dec. 3.In early November, the President’s Working Group on Financial Markets released a report suggesting that stablecoin issuers in the United States should be subject to “appropriate federal oversight” similar to that legislated for banks.Fueled by the potential government interference and negative short-term consequences, Bitcoin bears are likely to profit $80 million on Dec. 3 options expiry.Bitcoin options aggregate open interest for Dec. 3. Source: Coinglass.comAt first sight, the $460 million call (buy) options are evenly matched with the $485 million put (sell) instruments, but the 0.96 call-to-put ratio is deceptive because the 17% price drop from $69,000 will likely wipe out most of the bullish bets.For example, if Bitcoin’s price remains below $57,000 at 8:00 am UTC on Dec. 3, only $24 million worth of those call (buy) options will be available at the expiry. Therefore, there is no value in the right to buy Bitcoin at $60,000 if it is trading below that price.Bears are comfortable with Bitcoin below $57,000Listed below are the four most likely scenarios for the $950 million Dec. 3 options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:Between $54,000 and $56,000: 290 calls vs. 3,480 puts. The net result is $175 million favoring the put (bear) options.Between $56,000 and $58,000: 750 calls vs. 2,160 puts. The net result is $80 million favoring the put (bear) instruments.Between $58,000 and $60,000: 1,510 calls vs. 1,040 puts. The net result is $30 million favoring the call (bull) options.Above $60,000: 2,760 calls vs. 860 puts. The net result is $115 million favoring the call (bull) instruments.This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.Bulls need $58,000 or higher to balance the scalesThe only way for bulls to avoid a loss on Dec. 3’s expiry is by pushing Bitcoin’s price above $58,000, which is 2% away from the current $56,900. However, if the current short-term negative sentiment prevails, bears could exert some pressure and try to score up to $175 million in profit if Bitcoin price stays below $56,000.Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional FUD and surprise market crashes.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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