Regulations for Cryptocurrencies causing Another Wave of Panic

Regulations for cryptocurrencies from governments will be very much in place soon. China announced just yesterday that they will have tighter measures to protect the financial system hence in their statement, they mentioned that it is necessary to “crack down on Bitcoin mining and trading behaviour, and resolutely prevent the transmission of individual risks to the social field.”

China

So I am sure you know what happened next, here we go again....Bitcoin tumbled and fell. It was only just recovering and now with this news, more selling is set to happen. I think there are quite a few factors involved in this. China has all along been in the process of creating their own digital yuan yet according to the Cambridge Centre for Alternative Finance, roughly 70% of the hashrate for mining Bitcoin—that is, the processing power for verifying transactions on the blockchain’s ledger—is generated in China. Hence, it is quite ironic and with the government. With some banks in China like China Citic Bank barring customers from trading Bitcoin using their bank account, lots more regulation is going to be rolled out as China is aiming to reduce carbon dioxide emissions by at least 65 per cent by 2030, relative to 2005 levels, and then achieve carbon neutrality by 2060.

United States of America

The US Treasury is also rolling out stricter rules for cryptocurrency compliance where any transfer worth more than $10,000 needs to be reported to the Internal Revenue Service (IRS). This is definitely a huge step, if individuals who bought Bitcoin earlier on, their holdings would definitely be worth much more than $10,000 and with each transfer of >$10,000, they will need to report it to the IRS to ensure taxes are paid.

I am not surprised by US move to have more regulations for cryptocurrencies as the recent Colonial Pipeline hack which was caused by a cyberattack and the company had to shut down approximately 5,500 miles of pipeline in the United States, crippling gas delivery systems in Southeastern states, Joe Biden had to declare a state of emergency and Joseph Blount, CEO of Colonial Pipeline paid the ransom to DarkSide which was 75 BTC payment (approximately $4.4 million at the time of the transaction). It was later discovered that DarkSide, the hacker group behind the Colonial ransomware attack, received $90 million in bitcoin ransom payments from 47 victims. It is huge, although the wallets were traceable and funds were drained from it where there were speculation that this bitcoin had been seized by the U.S. government although no one can be sure of it, this definitely further enforced the need for regulation of cryptocurrencies to the US government. Joe Biden has also signed an executive order to strengthen US cybersecurity defences after the Colonial Pipeline hack.

Thoughts on more regulation

The governments would definitely wish to regulate cryptocurrencies as the volatility it has brought about in 2020 and 2021 is worrying for them. The run-up of Bitcoin and cryptocurrencies has brought about attention to it as it sparks concerns of market manipulation and uninformed retail investments. However, I definitely think there are ways to avoid the regulations but we will have to see how the regulations advance from here. In the meantime, I will hold on to my holdings of both BTC and ETH while continuing to DCA with a small amount that I have monthly. I do not hold such a substantial amount of cryptocurrencies (So I guess I won't be a millionaire anytime soon 😉) as the volatility is really 10X of the stock market as it reacts fast to news. As of now (22 May, 8.53am SGT), BTC is at a price of USD37,645.95 and ETH at USD2,449.00. Both looking rather attractive. 💎 🙌

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References:

-https://www.cnbc.com/2021/05/21/bitcoin-falls-after-china-calls-for-crackdown-on-bitcoin-mining-and-trading-behavior.html?utm_content=Main&utm_medium=Social&utm_source=Facebook&fbclid=IwAR23-PUM0QYttE1gKoE2mALKaks4CVBPxMeEmTlREgQvfjfbN69XWpyOFRQ#Echobox=1621608479
-https://www.cnbc.com/2021/05/20/us-treasury-calls-for-stricter-cryptocurrency-compliance-with-irs.html
-https://fortune.com/2021/05/02/bitcoin-mining-hashrate-china-inner-mongolia-ban/
-https://www.cnbc.com/2021/05/18/colonial-pipeline-hackers-darkside-received-90-million-in-bitcoin.html
-https://www.scmp.com/economy/china-economy/article/3134058/chinas-cryptocurrency-crackdown-sees-inner-mongolia-call

Age of inflation | How to fight against it?

Inflation is definitely a huge topic nowadays considering that the Fed has been printing lots of money coupled with natural disasters (Taiwan drought) and also the worsening pandemic situation in some parts of the world that helps produce many resources. I came across this article by A Pen Quotes on the warnings of inflation and I would think that definitely in the near future, prices are set to rise. Huge as well was at the annual Berkshire Hathaway shareholder meeting where Warren Buffett mentioned that, "We are seeing substantial inflation." He continues on to say, "We are raising prices. People are raising prices to us, and it's being accepted."

Pandemic in India causing prices to rise

The pandemic in India has been devastating as I watch media coverage on it particularly this coverage by Clarissa Ward from CNN. The amount of lives lost is atrocious and saddening. We all know that most of our items come from India or China as they are the powerhouse of manufacturing. With the pandemic raging through India which is one of the powerhouse of manufacturing, goods will be affected and crops will also be affected to a certain extent although certain parts of India are worse hit than others. Companies will have to raise prices as raw material increase in prices and these will be passed onto consumers.

How you can better prepare yourself for inflation

I came across this article on Yahoo! Finance on how you can cope with inflation and I found it rather informative. I will take the key points and elaborate using my own words.

1. Increase your earning power 

   This is definitely the most effective way to combat inflation but it is a very privileged choice because if you are able to have opportunities to increase your earning power means that you either have access to resources or ability to change jobs and earn more.

   Just like how The Wokesalaryman always advocates, to check the industry that you are in whether it is a sunset industry and pick up new skills to be the supply to the demand so that you are able to command a higher salary. With a higher salary, you can then have more capital to work with. 

   Read more: Becoming wealthy opens up opportunities for you | Why the rich will get richer | Dogecoin Millionaire Example

2. Start investing 

   I think in our current generation, many people are starting to invest at a young age as many interesting platforms and concepts besides the stock market is available for investing. Of course as always, you have to ensure that you are not investing with your short term funds. To get higher returns, individuals have been putting in more money to growth/tech stock and also cryptocurrencies. It is always to good to make sure you are able to stay the course in the long term and also build up good saving habits. Investing can be high or low risk and having a diversified portfolio or something suited to your risk profile is important to ensure that you are not panicking over any sudden drop or losses. 

   Read more: Importance of Building Up an Emergency Fund

3. Reduce your expenses and debts 

   If you are not able to increase your earning power, you will need to instead ensure that your expenses are kept low and debt levels are manageable. For example, going for a more affordable HDB flat than a expensive one or even a condo. Managing your expenses is a huge step in ensuring that your money is not being spent recklessly and at the end of the month, you realised you are left with nothing much. 

   Read more: 5 Tips on How I Save More Money

   In terms of managing your expenses, it is always good to automate your salary segregation to ensure you spend after saving and putting a portion of your salary aside. Debt is all right o have but ensure that you do not take on too huge a debt that prevents you from saving and investing sufficiently in the long run.

Of course, the spike in prices might just be temporary but it is always good to be well-prepared. Working on your financial status can be a great first step to knowing whether inflation will eat up the value of your money and how you can ensure that the growth of it beats inflation.

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References: 
https://finance.yahoo.com/news/warren-buffett-just-sounded-alarm-201500714.html
https://techcrunch.com/2020/10/06/india-approves-apple-partners-and-samsung-for-143-billion-smartphone-manufacturing-plan/
https://www.ibef.org/industry/pharmaceutical-india.aspx
https://www.ibef.org/industry/manufacturing-sector-india.aspx