Volatility is the first word that comes into most of the investor’s mind when talking about the world of cryptocurrency. From the trend that we have seen over the years, in regards to the market of cryptocurrency, it is clearly suggested that the future of cryptocurrencies, including bitcoin, is heavily dependent on a few factors. Although bitcoin has dropped considerably in value as compared to the start of this year, a long-term bullish run might just be around the corner.
1. Establishment of the Exchange Traded-Fund (ETF)
Whenever the idea of investments from the big financial spearhead institutions circulates, the requirement of the establishment of an exchange traded-fund, immediately pops up. From all the illegal activities and scams that have been percolating in the crypto space, it is heavily implied that major institutions do not want to invest in the market of cryptocurrency owing to the insecurity it exposes them do. Despite maintaining a highly efficient and cutting-edge framework of blockchain at its core, cryptocurrency is still prone fraudulent activities, mainly because of the anonymity it maintains.
Owing to the all the illegal activities happening across the crypto space, the U.S. Securities and Exchange Commission (SEC) has yet not approved a single crypto-linked ETF, keeping the investors from entering this market. In a recent rejection of such a proposal, the SEC stated that:
Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin or blockchain technology more generally has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because as discussed in detail below, BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.
The demands for the establishment of a crypto-linked ETF are ever increasing in the cryptomarket, and despite the recent rejection, SEC is still holding on passing its comment regarding a bitcoin ETF proposal made by SolidX, with backing from VanEck. SEC stated that:
The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change. Accordingly, the Commission designates September 21, 2018, as the date by which the Commission shall either approve or disapprove the proposed rule change.
So, considering the demands from the investors in the crypto space, if this ETF gets approved by the SEC, major amount of money is expected to flow into the cryptocurrency world as major institutions will start getting involved, taking the price of bitcoin to a new high.
2. Regulatory Framework
The lack of regulatory framework currently absent on the cryptocurrency world, is another major factor holding the investors back from entering the crypto space.
Recently, NASDAQ expressed its desire for a regulatory framework to be deployed upon the cryptocurrency space, so that prevention from scams can be made possible. Regarding the need of this framework, the Chief Executive Officer of NASDAQ stated that:
Certainly Nasdaq would consider becoming a crypto exchange over time. If we do look at it and say ‘it’s time, people are ready for a more regulated market,’ for something that provides a fair experience for investors, certainly Nasdaq would consider becoming a crypto exchange, over time.
This is just one of the few major organizations that has expressed this demand in order to make this market more stable and secure.
Ripple has also showed its inclination towards the deployment of a regulatory framework over the market of cryptocurrency . Ripple’s Chief Market Strategist, Cory John, stated that:
We’ve seen what happens when there aren’t investor protections. We’ve seen investors lose so much money, and we’ve seen it in the world of crypto. We’ve seen some real bad actors involved, so we’re thrilled that regulators are getting involved.
As soon as the regulatory framework is installed in the system for the prevention of attacks from illegal factors, this market is expected to become more stable and secure as a platform for the investors.
The Big Boom?
Reviews regarding bitcoin going big on the industrial scale have been revolving around the cryptocurrency world for a long time. With more and more institutional interest building up in the crypto market, the prices of cryptocurrencies, including bitcoin, are expected to rise and become less volatile in the near future.
Talking to CNBC, renowned financial analyst, Ran Neu-Ner stated that:
I think 2018 is the year where the mechanisms to allow retail consumers to get into cryptocurrencies start to open themselves up. The price will become more stable.
The co-founder of Reddit, and the VC of Initialized Capital, Alexis Ohanian even predicted that bitcoin will cross the mark of $20,000 by the end of 2018. He stated that:
At the end of the year, Bitcoin will be at $20,000. And Ethereum will be at $15,000 [which he later clarified as $1,500]. Great, now people can call me out if I’m wrong.
Regarding market stability and volatility linked to cryptocurrency, Alexis stated that:
As volatile as it’s been, we see it continuing [to go] up over the long term, because more and more people are going to look for alternatives to fiat as a store of value as we see currency fluctuations with states failing and other uncertainty, that makes having a digital store of value like bitcoin something that’s desirable, because you don’t have to worry about withdrawing it from a bank or the value disappearing as a government money.
Also regarding the robustness of the this market, Alexis stated that:
Bitcoin has had quite a bit of battle-testing over the years, and it’s certainly the most robust [cryptocurrency], and certainly one of the best proofs of crypto being a store of value.
In the hindsight of all the developments that have been taking place in the world of crypto, the most important being the establishment of ETF and the need for a regulatory framework, it is highly likely that the market will move towards stability in the near future.
As per the price of bitcoin, if the above mentioned frameworks get implemented on the cryptocurrency market, the market value of bitcoin will see a sudden boom, that some of the experts are predicting.