Facebook’s Libra project faces Congress today and tomorrow (16th and 17th July). According to Coindesk, this has put some pressure on bitcoin ahead of the government’s investigation. Writer Omkar Godbole says, “The price of a single bitcoin, which stood near $13,000 five days ago, fell below $10,000 earlier today and tested the 50-day moving average at $9,900 for the first time since February 18.” He adds, “past data shows BTC tends to drop ahead of congressional hearings related to cryptocurrencies and rise on favorable outcomes.”
He points to a number of occasions in the past when this has happened: last year it fell when the House Committee on Financial Services gathered for a hearing on “crypto as a new form of money”, and then rallied when it appeared the House wasn’t overly negative about it.
BTC also dropped from $12,000 to $6,000 in the 10 days leading up to a congressional hearing on 6th February 2018, when the Securities Exchange Commission (SEC) chairman and the head of the Commodity Futures Trading Commission testified before the Senate Banking Committee. Once again bitcoin rallied after this had taken place and opinion seemed to be moving in favour of cryptocurrencies.
What will happen this time?
As Godbole remarks, “Facebook’s fiat and government bond backed cryptocurrency Libra is widely considered a net positive for bitcoin, an anti-establishment asset. This is evident from the fact that BTC rallied from $9,000 to $13,800 in the eight days following Facebook’s unveiling of Libra’s white paper on June 18.”
He suggests it is unsurprising that BTC has taken a hit just before the Facebook hearing. If Congress throws a spanner in the works for Facebook, bitcoin could struggle to rally. However, Godbole says it might just rise well past $13,800 and possibly hit record highs before the end of the third quarter if the hearings are more optimistic.