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Kyrgyzstan’s central bank developing draft law for cryptocurrency industry

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The central bank for the Central Asian country of Kyrgyzstan is working on a draft law to regulate the cryptocurrency industry in the country.

According to an announcement on Nov. 13, the National Bank of the Kyrgyz Republic is developing a draft law that would regulate cryptocurrency exchanges in consultation with industry stakeholders.

The bank stated that the draft law would regulate the sale and purchase of cryptocurrencies with the aim of tackling fraudulent cryptocurrency schemes and financial crimes, as well as safeguarding consumer and investor rights.

Among the expected benefits of the forthcoming regulations, the bank notes the improved development of digital financial products, favorable conditions for the business community and even the possible introduction of a formal tax regime for digital assets.

However, the bank also expects crypto legislation to come with its own share of obstacles, stating that the cross-border nature of many private cryptocurrencies will make the law difficult to enforce without the proper infrastructure for monitoring and implementation.

Indeed, the bank states that due to the “lack of regulation and the chaotic nature of the cryptocurrency market,” there is no hard data on the number of businesses that would be subject to the new law. 

Per the announcement, the bank expects firm crypto regulations to provide more certainty for crypto-related businesses and attract investment without a significant effect on the government budget.

The bank will accept proposals for the draft law until Nov. 27, after which they will be published on the official register by Dec. 4.

Solid crypto regulations would be a long time coming for the politically beleaguered nation. In August 2019 the parliament introduced a bill to tax cryptocurrency miners, only for authorities to cut off electricity to miners a month later due to reported overconsumption. 

Last summer, the parliament was still deliberating on a solid tax regime for cryptocurrency miners, but civil unrest has since derailed previous political initiatives, with a rump parliament electing nationalist opposition leader and former member of parliament Sadyr Japarov as acting president and prime minister on Oct. 7.



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Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

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Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.