The US has a huge effect on the global economy, so it’s certainly no surprise that cryptocurrency investors are nervous about how potential regulation in this leading superpower could affect Bitcoin as we know it. While Bitcoin is notoriously volatile naturally, the potential for regulation to either devastate or skyrocket the overall price of the leading cryptocurrency is huge. If a single cryptocurrency trade can affect the market, a big change in the US markets could certainly have an effect – but what would it be? We’re exploring this below.
How Does The US Affect The Overall Economy?
When taking a step back from cryptocurrency, we can look at how the US affects the world’s economy as a whole to learn more about how the country’s activity can actually affect a market. The USA is a huge global force when it comes to buying and trading power and, as a result, a simple trend can drive up or collapse a market depending on the reaction the country’s citizens have. The USA has the world’s largest economy and with a quarter of the world’s GDP to its name, they certainly have the funds to drive into any market.
However, while the USA could sink or float an industry, it also needs the rest of the world’s economies to thrive. The country is full of foreign companies who have relocated or expanded overseas, whether via a virtual office or a physical one and for this reason alone, the world’s economy has essentially become a part of the USA. Without this addition, they certainly wouldn’t have their strong position in quite the same way.
So, What Does This Mean For Bitcoin?
Given the above point, the USA has the potential to improve the Bitcoin market hugely. While the likes of Silicon Valley, New York, and Chicago have already taken leaps towards the adoption of cryptocurrency and blockchain technology, there’s quite a battle still left to fight and with talk of bans and intense regulation, the concern is that there’ll be no way for Bitcoin to flourish on US soil.
With reports suggesting that around 8% of the US population own cryptocurrencies in some form, that’s around 18,000,000 people that have the potential to utilize and reinvigorate the Bitcoin market. Bitcoin is a decentralized currency, meaning that the market is global by default. With that in mind, just think – if those 18,000,000 American people started to trade and spend their Bitcoins simultaneously, the industry could regulate itself and start to stabilize not just in the USA, but in the entirety of the world.
What Else Affects The Price?
Regulation is by no means the only factor that can affect the price of Bitcoin – there are many. A single purchase can affect the price in some way, but here, we’re looking at four main causes of price fluctuations:
The demand for Bitcoin is the key driver of price changes. When demand is high, more and more people will be looking to buy and the price tends to rise up. Similarly, when demand lessens and people stop buying the coins, the price crashes.
In a similar way to demand, the availability and supply of Bitcoins also affect the price. With millions of Bitcoins still yet to be mined, each new coin that settles into the market better spreads the price across the coins. In theory, if all of the coins were mined in a single day, the price could crash, simply because of a higher number available for purchase.
Just like demand, publicity can drive the buying, trading, and use of Bitcoins, whether positive or negative. With negative publicity, the price has the potential to crash when people stop using it, while good publicity can encourage people to get involved and ultimately drive the price up.
The US is a global superpower and with much of the world’s economy resting in their hands, it’s easy to see why regulation of cryptocurrencies could devastate the market. With sensible regulation, cryptocurrency use could go up, but when investors are already being warned away from purchasing and trading in Bitcoin, it’s difficult to see how the country could change their tune beyond the tech hubs across the continent. In short, time will tell as to how the US reacts to these new technologies, so watch this space.
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