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RE: This Week's Great Debate: The Increasing Regulations of Cryptocurrency
I have no time (yet) to respond in detail, but I see no reason why cyptocurrency exchanges should in principle be treated any different than regular exchanges when it comes to the 'exchange' part. That cryptocurrency is involved instead of beans or corn in principle makes no difference.
Of course the SEC will look into this because that is the job they got from the legislator.
For the avoidance of doubt, this does not mean that I agree or disagree with existing regulations themselves (whether as a whole or parts thereof). That is also a different matter. It is important to be clear on what exact element we are discussing in this respect.
Thanks for contributing! I think mainly I'm opposed to SEC regulations because they often limit the individual's ability to compete. They may institute a pattern day trading regulation, as they currently have in the stock market. This places a firm limit on the number of times an investor can buy and sell the same holding on the same day. If you engage in the buying and selling of a holding on the same day more than 4 times within a five day trading period, you get "flagged" as a pattern day trader. This then removes your ability to buy and sell any holding within the same day for a ban of 90 days. The second thing they may do is take away market making ability for individuals and instead designate that power only to the exchanges. The problem with this is that often brokerages can control price action by stacking the buys or sells in a concentrated area instead of spreading them out more evenly. They can sometimes create very large price gaps, causing a holding to hit a firm resistance on one price, which could then incite selling as individuals notice the bearish double or triple top trend. In reality the holding may have gained quite a bit volume in buys, but it won't be reflected in price action due to the market maker's power to set bids at the same price for many different holdings.
These kind of regulations are instituted under the guise of "protecting the plebians from themselves." So smart investors that don't over trade on margins and have studied TA rigorously to make calculated day trades on pre-determined criteria get punished because some people are foolish with their money, do no DD, then complain and get outraged when their un-calculated risk taking approach crumbles down on top of them. Regardless of whether it is helpful to save people from their own lack of self control or not, the unfortunate side effect is that the big money has an even bigger edge over individual investors. It's always going to be advantageous for whales in any free market, the last thing I want is the government stepping in to take my competitive edge away and delegate those decisions that will be made with my money to the financial institutions.