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Macro trend, speculative dominance, regulatory uncertainty, short selling and scams, are the main reasons for the decline of the Bitcoin in recent times, according to Jonathan Cheesman, a partner at the investment firm Distributed Global.
Citing continuous improvements in the regulation and infrastructure of the digital currencies as a valid asset class, investors will flock to these forms of robust and safe measures of inflation, said Cheesman,
“For some, things are even more acute now — Venezuela and Turkey being the most obvious examples — and debt sustainability 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.”
Strong Infrastructure that can withstand an asset class such as cryptocurrencies has to be resolute and firm especially given the fact the the investors in question are institutional investors and large-scale retail investors, this infrastructure was feeble, at best. There was also an evident lack of essential publicly tradable instruments that allowed and actualised the demand for these cryptocurrencies from the investors.
The capital market which is deemed responsible for the ‘flow’ of money could not facilitate this ‘flow’ in the crypto-market, primarily due to the incessantly weak infrastructure and the uncertainty in essential regulation. This speculation set off the creation of a bubble in the crypto-market in this calendar year, similar to ones set off previously in 2012 and 2016. Ongoing corrections in the aforementioned bubbles were set-off by finicky investors and speculators in the markets.
Correction and recovery will not follow the previous trends in this scenario. About 80% of the correction followed the previous pattern, but the recovery will be starkly different than the past.
Support level push was not seen in the Bitcoin over the past years, the ability to gain upward momentum and rise beyond a base or support level was a trait often absent in the crypto-giant. This year saw that trend deviate, the Bitcoin has made three attempts to lash out from the $6,000 shell, and through the tumultuous rise and fall, there has not been a drop below the support level of $6,000.
There has been a crypto-inclusion trend in the market, of late, and, as mentioned earlier, the regulatory framework and the infrastructure, centred around custodianship is looking positive and will encourage more institutions to embrace the crypto-market despite being a fledgling.
“Regulators across the globe have struggled with how to responsibly police crypto. A decentralised 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, data and risk management solutions.” concluded Cheesman.