It’s been a trying year for the cryptocurrency industry. After hitting a high of over $68,000 in November 2021, bitcoin plunged to hover around $20,000.
But for long-term ETF investors, some experts advise taking the crypto decline in stride.
“If you do it right, then what’s happened in the last nine months is totally irrelevant,” Ric Edelman, founder of Edelman Financial Services, told Bob Pisani on ETF Edge. from CNBC on Monday.
“If you’re investing for the next five to ten years, it’s just an ordinary anomaly in the market, and you ignore it,” he added.
But with bitcoin emerging from a nearly two-year low, short-term tempers are colliding with a mix of positives and negatives shaping the direction the crypto community is heading from now.
“It’s a really dynamic time in the market,” Matt Hougan, CIO of Bitwise Asset Management, told Pisani on Monday.
A massive ethereum technical upgrade is a constructive force for the future of the world’s second-largest blockchain, Hougan said. A wave of institutional investors entering the market and an influx of venture capital activity are also forward-looking indicators for the future of crypto.
On the other hand, the regulatory pressures exerted by the Federal Reserve and the Securities and Exchange Commission are working against it.
“It creates this volatile market where crypto goes up and down and can’t quite tell which way to go,” Hougan said. “And I think we’re probably stuck there, at least until September.”
Mr. Edelman explained that for institutional investors to engage with Wall Street firms, endowments and pension funds, regulatory and legislative rules must be in place.
“The adults in the room agree that regulation is a good thing,” Edelman said. “Right now we have 1% engaging in crypto. You won’t get the other 99% until they know clearly what the rules of the game are.
“We’re seeing new rules coming out of the Treasury, the IRS, FINRA and the Fed,” he said. “And from the SEC and the CFTC. We have over 50 bills in Congress right now. And it’s all very healthy. »
SEC Chairman Gary Gensler said the agency should have a major role in crypto enforcement, especially for tokens. In a speech this month, Gensler issued a warning signal to organizations he believes are violating existing securities laws, asking staff to possibly “fine-tune compliance for cryptographic security tokens and intermediaries. »
“I think there was a pretty direct threat to crypto exchange venues — large-scale entities like Coinbase,” Hougan said. “They are clearly on his horizon.”
In July, shares of the cryptocurrency company tumbled after news broke that it was facing an SEC investigation into whether the platform was offering unregistered securities.
“I’m happy to say it again and again: We believe our rigorous due diligence process — a process the SEC has reviewed before — keeps securities off our platform,” said Coinbase Chief Legal Officer, Paul Grewal, on Twitter.
Proposals to strengthen oversight of the crypto community by the SEC are likely to be met with hostility from the community itself, although the agency has already taken steps to enforce its regulatory agenda.
In February, the SEC accused BlockFi Lending of failing to register the offering and sale of its retail cryptocurrency lending product. The company agreed to settle the charges, paying a $50 million penalty and ceasing unregistered offerings and sales of the loan product.
“A year from now, major exchanges will be in the process of registering with the SEC,” Hougan said. “I think individual tokens are a much longer term.”
Although speculative assets have a tough road ahead, Edelman said the number of people who own cryptocurrencies continues to steadily increase.
“What is interesting is that, despite the fact that [Coinbase soit] down 70% from its high, the number of people owning it is unchanged,” he said. “Which means those who wanted to are not scared away by it.”
Beyond the crypto community, adoption rates by major investment firms show that digital currencies are being embraced by Wall Street, Hougan said.
“The arrival of Blackrock and Schwab reinforces to the average investor that bitcoin is not going away,” Hougan said. “I think the issue has been resolved. The question now is how big is that future. »
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