Tax or ban? Fed eyes Bitcoin

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Tether (USDT) records $120B market cap: A green light for crypto investors

Key points:

• Tether's market cap has risen to a new high of $120 billion.

• Increased demand reflects growing adoption and market confidence.

News - Tether (USDT), the leading stablecoin, has reached a record market cap of $120 billion, signaling strong demand in the crypto market. This significant milestone marks a rebound from earlier fluctuations and indicates renewed confidence among investors.

What’s the reason behind it? The surge in Tether’s market cap is attributed to its critical role in facilitating trading across various exchanges, especially amid the ongoing crypto recovery. The rise reflects a broader trend of increased adoption of stablecoins as traders seek refuge from the volatility of other cryptocurrencies​

Furthermore, analysts suggest that Tether's growth can be viewed as a bullish indicator for the overall crypto market. As market conditions stabilize, the reliance on USDT for trading pairs could enhance liquidity and facilitate further investments in digital assets​.

The upside - Tether's impressive market cap achievement underscores the pivotal role stablecoins play in the evolving cryptocurrency landscape. It provides a stable medium for transactions and investments.

ECB warns: Bitcoin's rise could threaten social stability in the long-run

Key points:

• Rising Bitcoin prices may contribute to wealth inequality.

• The ECB has emphasized the need for regulatory measures.

News - Economists at the European Central Bank (ECB) have expressed concerns that the recent surge in Bitcoin's price could exacerbate wealth inequality. They believe this would benefit early adopters while leaving latecomers at a disadvantage. 

The ECB also highlighted that Bitcoin's original goal of becoming a universal payment system has largely failed due to issues like high transaction costs and slow processing times. 

What’s more? With Bitcoin evolving into a speculative investment, the potential for wealth concentration among a few could have significant societal implications. As it gains popularity, the ECB warns of potential systemic risks and the importance of implementing appropriate regulations to safeguard financial stability. 

Without timely intervention, the growing reliance on cryptocurrencies could lead to broader economic disparities​

The reality check - The ECB's warning highlights the necessity of establishing a robust regulatory framework to mitigate the risks associated with cryptocurrencies. It aims to ensure that the benefits of digital assets are equitably distributed​.

Japan’s DPP leader proposes 20% crypto tax cuts and reforms to boost digital assets

Key points:

• The proposal includes lowering crypto tax rates to 20%.

• It aims to foster growth in Japan's digital asset sector.

News - Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People (DPP), has proposed significant reforms to the country’s cryptocurrency tax structure. In a recent statement, Tamaki pledged to lower the tax on crypto gains to 20%, suggesting that this rate would better align with traditional financial asset taxation​.

Currently, profits from cryptocurrencies are taxed as miscellaneous income at rates ranging from 15% to 55%, depending on personal income levels. This has made Japan’s tax regime one of the harshest for crypto investors​. 

Tamaki's plan also includes eliminating tax liabilities for transactions where one crypto asset is exchanged for another. It aims to encourage more active trading and investment in digital assets​.

The path forward - This initiative is part of a broader effort to position Japan as a leader in the Web3 economy. The DPP has indicated that reducing the tax burden could prevent the outflow of talent and businesses to more crypto-friendly jurisdictions​. As Japan approaches its election on 27 October, this proposal may resonate with voters looking for economic relief and innovation in the digital sector​.

Fed advocates taxation or ban of Bitcoin to address government deficits

• New research suggests taxing or banning Bitcoin to maintain fiscal stability.

• Bitcoin’s fixed supply complicates traditional government budgeting.

News - A recent research paper from the Federal Reserve Bank of Minneapolis has proposed that Bitcoin may need to be either taxed or banned to help governments manage their ongoing budget deficits. 

Released on 17 October, 2024, the paper argues that Bitcoin creates a "balanced budget trap," which complicates efforts to maintain permanent government deficits.​

The researchers highlight that Bitcoin, with its fixed supply and lack of ties to real economic resources, serves as an alternative financial asset that disrupts traditional fiscal policies.

They argue that implementing a tax on Bitcoin or an outright prohibition could restore governments' ability to run primary deficits without being forced into budgetary balance​.

The implications - This proposal has garnered criticism from Bitcoin advocates who argue that it reflects a broader trend of regulatory scrutiny facing cryptocurrencies. Critics have also noted that the paper echoes similar sentiments expressed by the European Central Bank (ECB), which has raised concerns about Bitcoin's potential to exacerbate wealth inequality​.

More stories from the crypto ecosystem

• Binance trading volume hits historical $100 Trillion milestone: Impact on BNB?

• Solana may not hit $200 this cycle, even with bullish signs – Why?

• Ethereum open interest, RSI hit multi-month high – Is $3,000 near?

• PEPE’s 27% gains in 30 days at risk? Here’s why…

• Bitcoin buying pressure soars, but here’s why BTC can fall to $66K

Interesting facts

• On 14 October, U.S. Vice President Kamala Harris unveiled plans to boost crypto literacy among Black Americans, targeting over 20% of this demographic with educational initiatives aimed at enhancing financial inclusion.

• Crypto liquidations surged to $300 million on 18 October, primarily affecting long-position traders, emphasizing the market's volatility and the need for cautious risk management. 

• As of 19 October, India has surpassed the U.S. and China in global crypto adoption, with over 20% of its internet users engaged in cryptocurrency activities, signaling a cultural shift toward digital assets and blockchain acceptance.

Top 3 coins of the day

Decentraland (MANA)

Key points:

• MANA experienced a 1.66% increase in the last 24 hours, alongside a 12.43% decline over the past week.

• At press time, MANA was trading at $0.32.

What you should know- Decentraland's price showed volatility, testing the 0.618 Fibonacci level during the analysis on the daily time frame. It faced resistance near the $0.34 price level, which had previously hindered upward movement. The RSI was at 53.80, indicating neutral momentum, while the On-Balance Volume (OBV) suggested stable trading volume supporting the price. A successful breakout above $0.34 could push MANA toward $0.37, while a failure to hold current levels may lead to a retracement to the $0.30 support.

Solana (SOL):

Key points:

• SOL experienced a 0.23% decrease at press time, trading at $167.

• The price has seen significant volatility, trading between $127 and $185 over recent weeks.

What you should know - Solana's price tested the resistance level near $170, which has previously been a barrier for upward movement. This level on the daily chart also aligned with the ascending triangle pattern characterized by higher lows. The Awesome Oscillator (AO) was positive, reflecting strong buying pressure, while the Chaikin Money Flow (CMF) indicated mild accumulation. A breakout above $170 could target the $180 mark, while a drop below $160 may signal a reversal, prompting a potential retracement to support at $150.

XRP (XRP)

Key points:

• XRP experienced a 0.42% increase at press time, trading at $0.55.

• The price showed significant volatility, ranging between $0.36 and $0.61 over recent weeks.

What you should know - XRP's price tested the resistance level near $0.56, which has previously acted as a barrier to upward movement. This resistance coincided with the upper band of the Bollinger Bands, indicating potential overbought conditions. The MACD showed a bullish crossover, suggesting positive momentum. A breakout above $0.56 could target the $0.58 mark, while a drop below $0.54 may signal a reversal, prompting a potential retracement to support at $0.53. Traders should monitor these critical levels for potential trading opportunities.