Regulatory Developments in Cryptocurrency
In this article, we delve into the recent regulatory changes and developments surrounding cryptocurrency, but first we need to understand what cryptocurrency is.
Cryptocurrency is a modern take on a digital virtual currency, that is used as a peer-to-peer financial system to send and receive payments, but also works as what many would consider, a more speculative asset class. Unlike traditional fiat currency issued by the central bank, cryptocurrency operate on decentralized networks built on blockchain technology. The blockchain technology is used to record transactions that ensures transparency and completely eliminates the need for intermediaries, such as banks, in financial transactions.
After the crypto market peaked in 2021 with a total market cap of $3 trillion, cryptocurrency came down to a 2022 low with a market cap of $796 billion. Since then, the crypto market has climbed its way back to over $1 trillion in market cap and hovering around these levels for most of the year. It was not until recently that the cryptocurrency market has seen a notable surge in value, which begs the question - what is the driving force behind it?
The growing interest from institutional investors has contributed significantly to the ascending crypto value for the reason that it acknowledges cryptocurrency as a significant participant in financial development. Another contributing factor is the high inflation and overall conditions of the global economy that impact investor sentiment to drive capital into assets like different cryptocurrencies. Whilst inflation is still high and may continue to rise, bitcoin can work as a hedge to inflation due to its fixed supply and decentralized nature. Lastly, technological development within the blockchain and crypto ecosystem continue to upgrade and further advance decentralized finance, which leads to an increase in investor confidence.
Mainstream adoption of cryptocurrencies
In recent weeks, one of the world’s largest asset management firms Blackrock Inc, has shown interest in launching a Bitcoin Exchange-Traded Fund (ETF). An ETF is an investment fund that allows investors to buy and sell a diversified portfolio of e.g. stocks and bonds and in this case, Bitcoin. This would provide a much more accessible and regulated way for institutional and retail investors to gain exposure to Bitcoin without directly holding the cryptocurrency. This is a huge step in cryptocurrency because it signifies a broader institutional acceptance of digital assets, and could very well pave the way for greater mainstream adoption of cryptocurrencies.
In conclusion, as institutional interest grows and market dynamics continue to shift, the cryptocurrency space is poised to retain its pivotal role in reshaping our financial system. The global adoption of cryptocurrency may still be on the horizon, but the change is happening, and it’s happening fast. So even though it may seem overwhelming at times, always remember that adaptability and wise choices will guide you through this ever changing world of finance.