Distributed Global Investment Firm: Bitcoin Is Declining Because Of These 5 Reasons
The market hasn’t been to kind to bitcoin this week. The cryptocurrency’s value decreased significantly and investor Jonathan Cheesman surmises that the reason for the decline is macro trend, speculative dominance, regulatory uncertainty, short selling, and scams. Cheesman is optimistic though; he explained that other investors are bound not recognize the value of cryptocurrency as a legitimate point of value. In his own words:
For some, things are even more acute now – Venezuela and Turkey being the most obvious examples – and debt sustainably is a real risk to many fiat currencies. In looking for global stores of value gold has served a purpose, but it is archaic. A digital store of value is both more practical and more in touch with the growing millennial generation.
Until 2018, certain infrastructure targeting institutional investors and retailers was nonexistent. Institutional investors interested in the cryptocurrency market faced barriers such as custodianship and few public tradable instruments able to facilitate the demand for crypto. Existing infrastructure if facing weaknesses and coupled with the regulatory uncertainty, it becomes difficult for large sums of capital to flow from financial markets to the cryptocurrency sector.
As a result, the speculative cryptocurrency bubble in 2018 is a concept similar to bubbles in 2012 and 2016. Hopefully in this case, the ongoing correction will continue. Previous drops saw 80 percent of the cryptocurrency market repair itself.
When it comes to the past, Bitcoin failed to secure momentum at major support levels and did not recovery for several years. However, this year may be different – even though the currency has tried to reach about the $6,000 level, it seems to still be struggling. The hope is that the regulatory framework will improve and investors will start taking more risks.
Regulators across the globe have struggled with how to responsibly police crypto. A decentralized movement poses a lot of complications in classifying the assets and bad actors muddy the water. As a result, things have been moving fairly gradually, but overall regulators have taken a tone that shows they respect the potential innovation. The regulatory uncertainty has in turn slowed institutional investors, as have the lack of custody, insurance and risk management solutions.
At this point, it will be interesting to see where cryptocurrency heads, especially in light of such comments.