A crackdown by the US Securities and Exchange Commission and other regulators that have been investigating the naughtiest crypto firms has proven to be a boon to the industry, with market participants saying they are more likely to invest in the space after greater enforcement action.
Nearly 60% of the 564 respondents to the latest MLIV Pulse survey indicated that they view the recent wave of legal action in the crypto space as a positive sign for the asset class, whose brand volatility has faded in recent months. Key interventions include US regulatory investigations of bankrupt crypto firms Three Arrows Capital and Celsius Network, as well as an SEC investigation of Yuga Labs, the creators of the Bored Ape suite of non-perishable tokens, or NFTs.
“I am in the ‘yes’ camp,” said Chris Gaffney, Head of Global Markets at TIAA Bank. As a professional investor, you need a regulated investment opportunity and open doors for more professional investors to get involved in cryptocurrencies, if they are more regulated.” Taking cryptocurrencies out of the Wild West into traditional investing, the better off.”
The sentiment extends to Bitcoin. Most investors were a little more optimistic about the cryptocurrency than they were when asked in July. Nearly half of respondents expect the world’s largest cryptocurrency by market capitalization to continue trading between $17,600 and $25,000 through the end of this year — a departure from the poor forecast this summer, when most said it was likely to drop first to $10,000 Instead of going up to $30,000. To be fair, this time respondents had a broader list of options to choose from than was available in the previous survey.
“Our investors and the market understand that decentralized protocols have unique advantages that benefit not only the cryptocurrency market, but also the traditional market more broadly,” said Mary Catherine Lader, COO of Uniswap Labs, in a Bloomberg TV interview.
While bitcoin is down about 60% this year, its price has been stuck between $18171 and $25203 since the previous survey, unable to meaningfully break out of that range. Volatility has also declined considerably, with the T3 Bitcoin volatility index down 33% since the coin reached an all-time high of nearly $69,000 on November 10. Bitcoin was trading above 19,400 on Monday as of 8 a.m. New York time.
Bitcoin has maintained a strong correlation with risk assets as well as the S&P 500 index since March, barely changing its position in the past three months as investors dumped the cryptocurrency with the same brush as anything else in a rising interest rate environment. About 42% of survey respondents said they believed that cryptocurrency’s correlation with technology stocks would remain the same over the next 12 months, while only 43% said they would increase their exposure to digital assets over the same period.
It was the story of the crypto halves of 2022, as the first half of this year was dominated by chaos. There have been bankruptcies, such as Voyager Digital Ltd. wiping $40 billion from the Terra blockchain ecosystem. Nearly $2 trillion in total value was wiped off the industry record in late 2021. In June, things began to turn as the cryptocurrency began to stabilize to its current range-bound level as the broader macroeconomic environment soured and traders shifted to more traditional assets. Like bonds and foreign exchange for profit.
Low volatility “is likely to be reluctant there,” said Katie Stockton, managing partner at Fairlead Strategies.
In September, the Ethereum network completed a major update to the network known as Merge, which by one estimate will reduce blockchain power consumption by about 99%. However, only about a third of investors said they believed that so-called Flippening, in which the market value of Ether exceeds that of Bitcoin, could occur in the next two years – a number that has largely stagnated since July.