How Will Crypto Regulations Influence Its Prices?

Stock Traders And Investors 

For the most part, stock traders and investors have a sense of what to anticipate from the market. Traders and investors are protected from fraud and other dangers by the many restrictions placed on the stock market. There have been no official governmental restrictions regarding cryptocurrency as of now. Since there is less certainty in the cryptocurrency markets, the associated risk is higher than in the stock market. Many platforms like briansclub provide investors and traders with all types of currencies and tokens.

That’s good news for the investors. The first wave of cryptocurrency investors made money in the last decade despite (or possibly because to) the lack of oversight in the industry. This was due in part to the fact that pioneering financiers apparently saw the absence of restrictions as a strong incentive to become involved. Many of these backers believed that cryptocurrency will alter the international financial system as we know it.

In November of 2021, the total market value of all cryptocurrencies was as high as $2.9 trillion. When compared to the stock market’s current value of $48 trillion, this is, of course, a tiny fraction of that amount. It may not seem like much, but for an asset class with a 10-year history, it was a big deal.

However, Bitcoin (BTC) has dropped almost 70% of its value from its 2021 high. As a whole, the value of the cryptocurrency markets has dropped below $1 trillion. Furthermore, it seems that government legislation may be in the horizon.

An executive order was signed by Vice President Joe Biden in March 2022 to provide a “whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.” Ten countries have already launched a digital currency, and China plans to do the same as soon as 2023. While these nations only account for 95% of global GDP, more than a hundred are investigating the possibility of launching their own cryptocurrency.

Some cryptocurrency investors are worried, while others are optimistic about the possibilities in a more controlled market. To find out how investors and the value of bitcoin assets could be affected by the new rules, we need to look at the implications of those rules.

How Regulations Might Affect Cryptocurrency Investing

According to Adam Reeds, CEO of Ledn, a crypto-backed lending service, “many institutions and more established organisations are sitting on the sidelines” and would prefer to participate in crypto if laws were in place.

Bitwise Asset Management’s general attorney and chief compliance officer, Katherine Dowling, has argued that “disclosures” should be mandated by legislation. Furthermore, Dowling argues that the investment class as a whole will benefit from greater openness as a result of these disclosures.

This level of openness is crucial for attracting institutional investors. It is necessary for institutions to have a risk profile for each investment due to their focus on risk management. Risk profiles like this can only be constructed for completely transparent assets like stocks or bonds, which cryptocurrencies currently aren’t.

For instance, in May, the algorithmic stablecoin TerraUSD (UST) had huge price reductions due to a lack of transparency, which had a domino effect on the values of UST, its sibling coin LUNA, and Bitcoin (BTC). A Chicago investor has filed a securities fraud class action complaint against six crypto venture capital companies that invested in Terra tokens in the months leading up to their collapse.

It wasn’t the first time a cryptocurrency has brought investors to their knees. Hackers stole $60 million worth of Ether (ETH) from Ethereum’s DAO token in 2016, causing the project to collapse. Although the stolen funds were eventually recovered after a blockchain split, the incident has lasting repercussions for the Ethereum community. In no little part because there are now not just one, but two, blockchains in use by the Ethereum community.

Recent issues with the stablecoin have been traced back to Tether’s USDT coin and the company’s refusal to provide full disclosure. In reality, USDT’s issuer was hit with a $42 million punishment by the CFTC after it was found to have broken the Commodity Exchange Act and other CFTC rules. Earlier in February 2021, they had already paid $18.5 million to the New York Attorney General’s office as part of a settlement. The current USDT treasury was the source of many of the settlements and penalties. This is the kind of issue that more stringent rules around cryptography may help resolve.

Experts predict that more price declines are probable unless laws are put in place to standardise the recording and trading of bitcoin assets. This kind of unpredictability is intolerable for a corporation of this size in the financial sector. Financial institutions may shy away from high-stakes asset speculation if they fear losing a significant portion of their capital owing to structural budgetary flaws.

Chief strategy officer of KingsCrowd Vin Narayanan argues that with the right laws and the resulting transparency, huge institutional investors might not only tolerate higher investments in cryptocurrency, but also assist stabilise asset markets generally. Reeds says his firm’s retail and high-net-worth customers just want to know what they’re getting into with their investments. Unfortunately, cryptocurrencies won’t have this kind of clarity unless rules are put in place.

Those rules are obviously on the way. Many crypto investors are likely wondering who will be responsible for enforcing such laws and what they would look like.

Price of Cryptocurrencies and the Impact of Regulations

Many industry experts feel that future supervision and regulation will help stabilise the pricing of digital assets, regardless of how the regulatory process plays out.

Since the fourth quarter of 2021, cryptocurrency prices have started plunging. Many ordinary investors fear that the market will never recover. The Chinese government is now among those predicting Bitcoin’s demise. But a remark like that may be enough to scare off many small investors, hastening the asset class’s decline.

However, Narayanan thinks that rules will help stabilise crypto values in the long run. He reasons that this is so because if laws are put in place, more money from institutions and ordinary people alike might be poured into digital assets. In the event of large-scale capital infusions, the prices of regulated cryptocurrencies may settle, luring ordinary investors who haven’t yet taken the asset class seriously. The result would be increased stability and value.

Reeds reassures investors that current crypto price issues are unrelated to any forthcoming regulation, which may help allay their fears about the future of cryptocurrencies. The present decline in Bitcoin values, he continues, is due mainly to global macro reasons.

To that end, Reeds says a country will eventually house “the new SWIFT banking system for digital assets,” and for a government stablecoin to become the global reserve for digital assets, it will need to be regulated and transparent.

While cryptocurrency prices may be down at the moment, the genie is already out of the bottle. It may be difficult to envision a future without cryptocurrencies, even if Bitcoin does “fall to zero.” New crypto leaders may emerge if regulation proves to be the key to price stability. People are now having interest in the newly launched cryptocurrency token facilities provided by briansclub.