Will greater clarity on regulation expand traditional investment in the crypto market?

Institutional, or traditional investors — excited by greater regulatory clarity — are going to drive ‘considerable expansion’ of the cryptocurrency market in 2019.

This is the bold forecast by the CEO of one of the world’s largest independent financial advisory organisations; Nigel Green, deVere Group.

Green comments: “The bearish sentiment of the last quarter of 2018 is now, I believe, behind us.”

Over the last 48 hours, the three biggest digital currencies Bitcoin, Ethereum and XRP have climbed 4%, 12%, and 3%, respectively.

“We can expect the current upswing to continue, albeit with peaks and troughs as in any financial market,” continues Green.

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Crypto regulation: Opening the door to traditional investment?

In the current crypto market, regulation and compliance challenges are deterring investors from venturing into the virtual currency space.

Traditional financial institutions are held to strict regulation, especially concerning anti-money laundering (AML) and know your customer (KYC). As long as the crypto space does not adhere to these, which overall it does not, investment from traditional investors will stagnate.

However, there is a turning in the tide, and cryptocurrency exchanges are beginning to self-regulate (by taking tokens off the market that prioritise anonymity, for example) to meet the demands and values established by the more traditional financial bodies.

Self-regulation will be necessary, because global regulatory bodies move incredibly slowly, especially in such a complex space as the world of digital currencies.

“In 2019, the cryptocurrency market is set to radically evolve,” confirms Green. “We can expect considerable expansion of the sector largely due to inflows of institutional investors.”

“Major corporations, financial institutions, governments and their agencies, prestigious universities and household-name investing legends are all going to bring their institutional capital and institutional expertise to the crypto market.”

“The direction of travel has already been on this path, but there is a growing sense that institutional investors are preparing to move off the sidelines in 2019.”

This prediction is optimistic, and if anything is certain in the crypto space, it is that of uncertainty. However, “the acceleration of institutional investment is likely to be driven by greater regulatory clarity,” according to Green. And, I would agree wholeheartedly.

“More and more global jurisdictions can be expected to join the likes of Malta, Hong Kong, Japan and Switzerland in becoming crypto-friendly from a regulatory and pro-business viewpoint.”

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The coins

Whilst Bitcoin, the world’s largest cryptocurrency by market capitalisation, will remain dominant this year, Ethereum and XRP, due to their unique characteristics and problem-solving traits, can be expected to significantly fuel the 2019 upswing.

Green notes: “The smart contract abilities of Ethereum are already unrivalled. More and more institutional investors will be making use of these capabilities this year. Also, once Ethereum can accept outside data in its smart contract protocols, its price will rocket further.”

“When it comes to XRP, hundreds of financial institutions across the world are already working with it and this is a trend that is set to continue and grow in 2019.”

“In addition, XRP has been positioning itself to become a leading international facilitator of global remittances and inflows. This is a massive market in the expanding emerging economies.”

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...