Posted on: 23-04-2018 in Finance
There’s been more good news for Bitcoin investors as the Head of the International Monetary Fund, Christine Lagarde, sang the global praises of cryptocurrencies.
There was an immediate reaction on the stock market, as the world’s most valuable cryptocurrency, Bitcoin, saw its shares return above $8000.
Ms Lagarde, who has previously cautioned against the “dark side” of cryptocurrency, wrote in a blogpost last Monday that “just as a few technologies that emerged from the dot-com era have transformed our lives, the crypto assets that survive could have a significant impact on how we save, invest, and pay our bills.”
There’s an important communication here. Cryptocurrency has proved to be enormously volatile and its innovative position as a new technology, a currency and an asset class, has excited the appetites of hungry traders and investors, as well as invited healthy doses of scepticism from the financial world.
But Ms Lagarde’s post, and by extension the endorsement of the IMF, has helped draw an important correlation between the dotcom “bubble” and the Bitcoin boom – markets are both excited by and nervous about innovation, but history shows us that the strong will survive and that our love of technology drives us (and markets) forward.
The US’s two biggest regulators’ recent meeting to discuss cryptocurrency regulation had raised fears among long-term crypto investors (known as “HOLDers”) of a sector crash. However, the chairman of the Securities Exchange Commission surprised everyone by demarcating three separate areas of cryptos and pinpointing the area that needs the most scrutiny and regulation – International Coin Offerings, where cryptos are offered for sale at launch. This seems to have been well received by the market.
Ryan Zygone, head of regulatory relations at Ripple, the world’s third largest cryptocurrency, has called upon regulators in the UK to follow a similar line to the US and end the “Wild West” days of the cryptocurrency market. He said, “we’re at that time now where we need more clarity and rules and we need more certainty. It’s a good time to start revisiting that ‘wait and see’ approach taken by regulators.”
It seems as though fears about staunch regulation are proving to be misplaced, as investors and the financial world at large are relaxing into the confidence and long-term security that regulation can bring.
There is no easy answer to this question. We reported earlier in the week that cryptocurrency was looking ever more viable as well as volatile as an investment option. And while the first quarter of 2018 proved to be the worst for cryptocurrency since the sector’s launch, last week saw the market bounce back with Bitcoin gaining over $1000. That’s what makes cryptos so exciting (and so risky) – the promise of extraordinary returns offset by the real possibility of a bubble that could be burst.
Cryptocurrency is still at an early and evolving stage of its development, far from its promise of a “global currency,” that much is clear. But with regulation and some degree of confidence and acceptance accompanying it, cryptocurrencies like Bitcoin have been transformed from the easily dismissed to the hard to ignore.