It’s been a tough year for the crypto business. After reaching over $68,000 in November 2021, bitcoin has fallen to hover around $20,000.
But for long-term ETF investors, some experts advise taking a big step into the cryptocurrency space.
“If you’re going to do this right, what’s happened in the past nine months is completely irrelevant,” Rick Edelman, founder of Edelman Financial Services, told Bob Pisani on CNBC’s ETF Edge on Monday.
“If you’re investing in the next five to 10 years, it’s just a passing picture in the market, and you’re ignoring it,” he added.
But with Bitcoin dropping to its lowest level in nearly two years, the short-term moods are offset by a mix of positive and negative factors that are guiding the crypto community from here.
“It’s a really dynamic market moment,” Matt Hogan, CIO at Bitwise Asset Management, told Pisani on Monday.
Hogan said that ethereum’s massive technical upgrade is a constructive force for the future of the world’s second largest blockchain. The wave of institutional investors entering the market and the influx of venture capital activity are also forward-looking indicators for the future of cryptocurrencies.
On the flip side, regulatory pressures from the Federal Reserve and the Securities and Exchange Commission are working against it.
“This creates this volatile market where the cryptocurrency goes up and down and it can’t decide which way to go,” Hogan said. “And I think we’re probably stuck there, at least until September.”
Edelman explained that for institutional investors to deal with Wall Street firms, endowment and pension funds, regulatory and legislative rules must be in place.
“The adults in the room know that organizing is a good thing,” Edelman said. “Right now, we have 1% involved in cryptocurrency. And you won’t get the remaining 99% until they see what the rules of the road are.
“We’re seeing new rules emerge from the Treasury, the IRS, FINRA, and the Federal Reserve,” he said. “And from the Securities and Exchange Commission and the Commodity Futures Trading Commission. We have over 50 bills in Congress right now. And it’s all very healthy.”
SEC President Gary Gensler said the agency should have a major enforcement role in cryptography, especially for tokens. In a speech this month, Gensler issued a warning to organizations he believed were violating existing securities laws, telling employees to “set compliance with crypto-security tokens and brokers.”
“I think there was a very direct threat against cryptocurrency exchanges — large entities like Coinbase,” Hogan said. “Obviously they are on his horizon.”
In July, the crypto company’s shares plunged after announcing that it was facing an investigation by the Securities and Exchange Commission over whether the platform was offering unregistered securities.
“I am happy to say this again and again: We are confident that our rigorous due diligence process – one that the Securities and Exchange Commission has already reviewed – keeps securities out of our platform,” said Paul Grewal, Coinbase’s chief legal officer. on Twitter.
Proposals for more SEC oversight over the crypto community are likely to meet with hostility from the community itself, even though the agency has already taken steps to enforce its regulatory agenda.
In February, the Securities and Exchange Commission accused BlockFi Lending of failing to register an offer and selling the crypto lending product to retail. The company agreed to settle the fees, pay a $50 million fine, and halt unrecorded offers and sales of the lending product.
“A year from now, large trading venues will be in the process of registering with the Securities and Exchange Commission,” Hogan said. “I think individual tokens are long-term.”
Although speculative assets have a difficult path forward, Edelman said that the number of people owning cryptocurrencies is still rising steadily.
“What is interesting is that despite the fact that [Coinbase is] It’s 70 percent off its high, he said, and the number of people who own it hasn’t changed, meaning those who want it aren’t bothered by it.
Hogan said that beyond the crypto community, adoption rates from large investment firms show that Wall Street is embracing digital currencies.
“The advent of BlackRock and Schwab reinforces to the everyday investor that Bitcoin is not going away,” Hogan said. “I think that’s sorted out now. It’s now just how big that future is.”