Bitcoin market, a platform that many experts term as the future of cryptocurrency has been the talk of the financial world for quite a long time now. But despite having a global exposure and cutting-edge technology employed at its core, most of the investors are on a defensive stance concerning the investments in the cryptocurrency world. As per the why part, fraudulent activities, lack of regulatory frameworks and the risks involved are the major reasons behind these restraint shown by the investors.
According to a recent survey report published by Wells Fargo/Gallup poll, it has been disclosed that a major amount of investors in the United States are holding back from investing in the field of cryptocurrency, specifically bitcoin, owing to all the risky, fraudulent and manipulative activities involved. It is stated in the report that:
The bigger constraint on bitcoin sales is likely the widespread perception that trading in the currency is not safe. While risk is central to how investing works, three in four investors who have heard of online currencies consider bitcoin a “very risky” investment.
According to the report, only 2% of the investors in the U.S. currently hold investments in bitcoin, and despite the rapid growth seen in the bitcoin market in the recent past, only less than 1% have future plans of buying it. On the other end, 72% of the investors have expressed that they have no interest in buying bitcoin at all in the future while 26% of the investors expressed their curiosity regarding the market but did not have any plans of buying it anytime soon.
The interest and awareness concerning the world of bitcoin is also differentiated by the gender and age group, as the survey suggested. As compared to women and senior members of the game, men and younger investors seemed to show more awareness regarding the world of cryptocurrency.
The major reason behind such a low interest of investors in the world of cryptocurrency lies in its current framework. As this entire market is based upon a decentralized and peer-to-peer network providing full anonymity to its users, it is often exposed and utilized by different sources in illegal activities and fraudulent acts. This is a major bottleneck that comes in when investors think from the perspective of security. Due to the presence of such illegal practices, large amount of investment money from big institutions has been kept on the sideline.
Volatility is another reason due to which the investors hold back from entering the world of cryptocurrency. The instability linked to the market has always been a major barrier in regards to the investments from big institutions. Nobody wants to invest in something that does not ensure any security at all, specifically if the scale is as big as the cryptocurrency world covering the entire globe.
U.S. Securities and Exchange Comission (SEC) also termed the cryptocurrency world as a fraudulent and manipulative area of operation, in a recent rejection to the proposal concerning the establishment of a bitcoin exchange traded-fund (ETF). It was stated by the SEC 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.
Regarding the world of bitcoin and crytpocurrencies, protection of the investors is something that is of ultimate importance when it comes to sustaining and growing this market in the long-term. Unfortunately, there have been no proper regulators to monitor the workflow of this nascent market as of yet. Recently, companies like NASDAQ and Ripple have expressed their desire for the need of regulatory frameworks to be implemented across this space for better security of the investors, ultimately leading to the stability of the market. Ripple’s Chief Market Strategist, Cory John, recently said 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.
Regarding the future of bitcoin, as volatile and risky as it might be, its market is expected to improve in terms of stability and security in the near future. The convenience that bitcoin provides overshadows most of its flaws. Alexis Ohanian, the Chief Executive Officer of Reddit, has also expressed his hopes regarding the bitcoin market saying 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.
All in all, the concerns of being risky and too volatile raised by the investors regarding the market of bitcoin might hold some value as of now, but as we progress into the future, with more and more developments seen in the bitcoin world in the form of demands for exchange traded-funds and regulatory frameworks, this market is expected to boom very soon. Investors might be holding back at present, but by the looks of it, a flood of money is about to come into the market as crucial decisions regarding the ETF and regulatory frameworks are made.