BTC Is Highly Speculative; Needs Regulation

Complaints are arising and getting tougher by the day as concerns the need for the regulation of this ‘almighty currency’, Bitcoin. A lot of people ( traders and analysts) especially, clamour for a basis of regulation stating that the problem of price fluctuations or volatility suffered is highly anchored on the fact that regulations are lacking and as such, need to be put in place.

A recent outcry is that of the European Central Bank (ECB) President, Christine Lagarde; stating that “Bitcoin is highly speculative and needs to be regulated”. She went further to point out that bitcoin has conducted “some funny business and some interesting and totally reprehensible money laundering activity and as such, there has to be regulations to be applied and agreed upon at a global level.

Why are regulations to this currency really important? And if so important, what has been stopping or hindering it so far? What is the current status of this currency and what’s it’s headwind? 

Regulations Are Important

It is often said that what is worth doing, is worth doing well. The benefits of regulation to whatever good to a people or community cannot be overemphasized especially considering the fact that it can be abused, misused or overused. Hence, regulations would go a long way towards tackling lots of issues. These could be;

First, considering the technological advancement in the crypto-world, especially with the presence of the anonymity feature in transactions, the presence of regulation is vital to reducing the associated legal risks, hence ensuring accountability and eliminating frauds. 

Second, according to James Gillingham, CEO of Fixflo, in the short term, with a regulatory headwind, Bitcoin can expect an increased volatility as already seen in the effects of the statements from the MAS, ECB, FCA and HSBC. Bar HSBC, the long-term view remains bullish. 

He says; 

With the influx of institutional money, regulation should provide the framework to enable more confidence investing in the space, and when a US ETF becomes available, it will be interesting to see how this impacts BTC’s price.

He further reiterates that with regulatory frameworks put in place, BTC will  become more widely accepted as an asset with a store of value.

What Has Hindered Its Regulations

Cryptocurrencies are founded on the principle of decentralization, meaning that it is consciously structured in a way that excludes it from being regulated by a central authority in the manner that a traditional currency would be.

Although some states have taken the effort of imposing some form of regulation on the usage of crypto currencies, some authors however classify those regulations as quasi-regulatory. The fact is, there are different views and perspectives to what crypto currencies may be termed as per time. This and more has contributed to the factors impeding on its regulatory framework.

The few regulations now obtainable in certain jurisdictions took a slow turn as most authorities grappled with getting a grip of what exactly the technology is all about before attempting to assign certain regulations to its use and operations. Irrespective of the movie taken, there exists no uniform international approach to regulating virtual currencies. As it stands, its regulation depends more on efforts taken by individual countries.

Getting BTC Regulated

Consequently, since the currency means different things to different regulatory bodies, they have all given their own sides to it  and regulatory rules. But a general and international one is needed and as such, efforts are being made to put things in place to get the currency properly regulated. 

Meanwhile, as wonderful as it is needed, there is really no need for a hasty or rushful regulation because of the harm it can cause to a maturing industry like this.  

BTC’s Current Price & Trend 

Gillingham states that BTC is growing up, it is in the adolescent phase and with that comes growing pains. Social sentiment, whales, fear, uncertainty and doubt are all still large movers of the price. Though due to the regulatory frameworks already put in place, the issue of price fluctuations is changing slowly.

Making an illustration with the case of JP Morgan and Paypal;  He continues that there is a marked change in sentiment as regards this currency already and noting that,  even with the current situation, with BTC in its adolescence phase, the market is now realising there is an alternative and this brings volatility and a higher risk.

At press time, Bitcoin is trading at a price of $39,266.13, a market cap of $729.19B with a volume of $63.03B and a circulating supply of $ 18,600,650 BTC. 

BTC’s Headwind

Gillingham advises that  currently, if you are a large institution and you want exposure, the default choice is Greyscale and potentially buying the stock of companies like Microstrategy and Square, who have purchased BTC under their treasury. 

“What we can say is BTC is growing up, it is in the adolescent phase and with that comes growing pains. Like any investment, keep informed and up to date, do your research, and be clear on your time horizons and confident in your thesis”.

 

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