It has been a difficult year for the crypto sector. 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 tracking the crypto’s descent in stride.
“If you want to get 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” on Monday. from CNBC.
“If you’re investing for the next five to 10 years, it’s just an ordinary event in the market, and you ignore it,” he added.
But with bitcoin hitting its lowest level in nearly two years, short-term temperaments collide with a mix of positives and negatives guiding the direction the crypto community takes from here.
“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, regulatory pressures from 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 doesn’t really know which way to go,” Hougan said. “And I think we’re probably stuck there, at least until September.”
Edelman explained that for institutional investors to engage with Wall Street corporations, 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% getting into crypto. You won’t get the other 99% until they clear the rules of the road.
“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 currently have over 50 bills in Congress. And it’s all very healthy.”
SEC Chairman Gary Gensler said the agency should play a major role in the crypto arena, 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 trading platforms — large-scale entities like Coinbase,” Hougan said. “They are clearly on his horizon.”
In July, shares of the crypto company fell after it announced 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 SEC oversight of the crypto community 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 crypto lending product. The company agreed to settle the charges, pay a $50 million fine, and cease unregistered offers and sales of the loan product.
“A year from now, major trading platforms will be in the process of registering with the SEC,” Hougan said. “I think individual tokens, that’s a much longer term.”
Although speculative assets have a difficult path to follow, Edelman said the number of people who own cryptocurrencies continues to rise steadily.
“What is interesting is that, despite the fact that [Coinbase is] down 70% from its peak, the number of people who own it is unchanged,” he said. “Which means that those who wanted it are not fazed by it.
Beyond the crypto community, adoption rates from major investment firms demonstrate that digital currencies are being embraced by Wall Street, Hougan said.
“The arrival of Blackrock and Schwab confirms to everyday investors that bitcoin is not going away,” Hougan said. “I think that’s settled now. That’s now how big that future is.”