South Korea's New Financial Watchdog Further Comments on Regulation, Fed Research Paper Connects Futures Trading with #Bitcoin Decline

Crypto Corner - May 9, 2018

South Korea's New Financial Watchdog Further Comments on Regulation, Fed Research Paper Connects Futures Trading with Bitcoin Decline and Buffett Disciple Rejects the Billionaire's Crypto Comments

South Korea's new Financial Supervisory Service (FSS) Governor, Yoon Suk-heun, expanded on comments reported Monday regarding cryptocurrencies. According to a report in the Korea Times, Yoon argued that when one considers their volatility, cryptocurrencies are more accurately construed as assets than currencies. This claim was made in a speech made after he formally accepted his new position:

""When you see ups and downs of the prices of cryptocurrencies, then it's understandable that cryptocurrencies are not currencies, but it's hard to agree with opinions that cryptocurrencies are not financial assets.""

Yoon also strongly hinted that current regulations, such as South Korea's ban on ICOs, could be softened as the FSS deliberates the proper interpretation of cryptoassets in the market.

""The government should make it clear what needs to be regulated and what things need to be lifted. Once these plans are implemented, then the market will be stabilized as cryptocurrencies will become less speculative," the governor said, adding the FSS will announce updates on cryptocurrency regulations once the regulator reaches a consensus."

A research paper done by the Federal Reserve Bank of San Francisco posits that Bitcoin's (BTC) price decline starting in Q4 of 2017 is concurrent with the launch of futures trading.

"From Bitcoin's inception in 2009 through mid-2017, its price remained under $4,000. In the second half of 2017, it climbed dramatically to nearly $20,000, but descended rapidly starting in mid-December. The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange. The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset."

Chamath Palihapitiya, CEO and founder of Social Capital and a self-described "disciple" of Warren Buffett and Charlie Munger, claims that they are wrong about bitcoin. Buffett recently compared bitcoin to "rat poison" while Munger took it further, likening it to trading "freshly harvest baby brains". In an interview on CNBC, Palihapitiya said that

"I'm a disciple of Buffett and Munger and one of the things which they have said for years that I believe is that you define a circle of competence and you stay within it," he said.

Palihapitiya singled out Buffett's poor track record on investing in tech in particular:

"I think it's been clear in his entire investing career that technology is not in his circle of competence."

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