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Regulations Could Make the Crypto Markets Even Stronger

Regulations Could Make the Crypto Markets Even Stronger

Global governments’ involvement in crypto is diverging.

On one hand, developing countries are rushing to adopt crypto. These countries see crypto adoption as a pathway to a brighter future.

El Salvador is already accepting bitcoin as legal tender…

Cuba made bitcoin and altcoins legal for commercial transactions and investments…

Ukraine just passed a law to make bitcoin legal tender by the start of 2023…

And other countries like Panama could soon follow.

On the other hand, countries like the United States and China have been trying to curb cryptocurrencies.

These countries view crypto adoption as a threat to their financial power.

China has reiterated crypto transaction bans several times since 2013.

I’ve never been to China, but the ban must not be working. Since, you know, it has been eight years, and they’re still trying…

In the U.S., the Securities and Exchange Commission (SEC) now wants to classify several crypto products as securities.

As securities, they would have to meet regulatory guidelines, similar to stocks and bonds.

Chairman Gary Gensler believes the SEC is protecting investors by imposing greater scrutiny on crypto markets.

But who is the SEC really protecting here?

A Blueprint for Becoming Poor

Gensler’s advice to young investors: Start saving early, targeting an 8% annual return.

Really, Gary? This is laughable.

If you’re lucky, you can get a 0.5% yield on cash in a savings account today. Meanwhile, the U.S. inflation reading last month was 5.2%.

So, by investing in a savings account today, I can get a real yield of negative 4.7% per year. That’s a hard pass for me.

To make things worse, after Coinbase received a notice from the SEC that it could be sued, the price of Ethereum fell 30% over the next two weeks.

If you sold Ethereum after the sell-off and stowed the money into a savings account, it would take you over 50 years to make up for the loss.

Following Gensler’s advice sounds like a blueprint for becoming poor.

Nonetheless, the threats of regulation are old news…

Higher Crypto Prices Are Coming

China’s government has been trying to ban crypto transactions for eight years.

The SEC has been calling various cryptos “securities” since 2017.

None of this has derailed the 5,600% rise in the crypto market over that timespan.

total market crypto index

(Source: Bloomberg.)

If anything, the SEC’s move to regulate cryptos will only make the market stronger by attracting new entrants.

Many institutions want regulatory clarity before they jump into the crypto space.

Better infrastructure and regulations have been two barriers for many institutions looking to move into crypto, according to Guy Hirsch, the U.S. managing director at eToro.

Walt Bettinger, Charles Schwab’s CEO, reinforced that view on a call in April, suggesting the company has been awaiting regulatory clarity before offering crypto services to its clients.

So, with its tampering in the crypto markets, the SEC may actually make them stronger.

I expect higher crypto prices are coming as fresh institutional money enters the market.

Regards,

Steve Fernandez

Research Analyst, Strategic Fortunes

 

Morning Movers


From open till noon Eastern time.

 

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