It’s been a rough year for the crypto business. After reaching a value of more than $68,000 in November 2021, bitcoin has sunk to around $20,000.
But for long-term ETF investors, some experts advise taking the crypto dip in stride.
“If you’re going to do it right, then what’s happened in the last nine months is completely irrelevant,” Ric Edelman, founder of Edelman Financial Services, told Bob Pisani on CNBC’s “ETF Edge” on Monday.
“If you’re investing for the next five to 10 years, it’s just a normal blip in the market and you ignore it,” he added.
But with bitcoin falling to a nearly two-year low, short-term sentiment is facing a mix of positive and negative factors that are guiding where the crypto community is headed.
“It’s a really dynamic moment in the market,” Matt Hougan, CIO of Bitwise Asset Management, told Pisani on Monday.
A massive technical improvement in ethereum is a constructive force for the future of the world’s second largest blockchain, Hougan said. A wave of institutional investors coming into the market and an influx of venture capital activity are also promising 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’s creating this volatile market where crypto is going up and down and I can’t figure out 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 firms, funds of funds and pension funds, regulatory and legislative rules must be in place.
“The adults in the room understand that regulation is a good thing,” Edelman said. “Right now, we have 1% engaged in crypto. You’re not going to get the other 99% until they get clarity on what the rules of the road are.
“We’re seeing new regulations coming out of the Treasury, the IRS, FINRA and the Fed,” he said. “And from the SEC and the CFTC. We have over 50 bills in Congress right now. And it’s all very healthy.”
SEC Chairman Gary Gensler has said that the agency should have a major enforcement role in crypto, 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 “regulate compliance for crypto-security tokens and brokers.”
“I think there’s been a pretty direct threat against crypto trading venues — large-scale entities like Coinbase,” Hougan said. “They are clearly on his horizon.”
In July, the crypto firm’s shares fell after it was announced that it was facing an SEC investigation into whether the platform offered unregistered securities.
“I’m happy to say it again and again: we’re confident that our rigorous due diligence process — one that the SEC has already reviewed — keeps securities off our platform,” said Coinbase Chief Legal Officer Paul Grewal. on Twitter.
Proposals for more SEC oversight of the crypto community are likely to be met with hostility from the community itself, though the agency has already taken steps to implement 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 firm agreed to settle the charges, paying a $50 million fine and ceasing unregistered offers and sales of the lending product.
“A year from now, the big trading venues will be in the process of registering with the SEC,” Hougan said. “I think the individual arguments, it’s a much longer term.”
Although speculative assets have a challenging road ahead, Edelman said the number of people owning cryptocurrencies continues to be a steadily growing figure.
“What’s interesting is that, despite that [Coinbase is] less than 70% of its high, the number of people who own it is unchanged,” he said. “Which means those who want it are not bothered by it.”
Beyond the crypto community, adoption rates by major investment firms show digital currencies are being embraced by Wall Street, Hougan said.
“The arrival of Blackrock and Schwab reinforces to the everyday investor that bitcoin is not going away,” Hougan said. “I think that’s now settled. Now it’s how big that future is.”
