As cryptocurrency prices continue to rise to new highs, more and more investors are becoming involved in the boom. After years of apathy, authorities and watchdogs are now beginning to investigate cryptocurrencies.
Why are watchdogs so apprehensive about the adoption of crypto?
Although crypto is receiving some positive attention, government authorities are hesitant to encourage its use. Among the most likely hypotheses are the following ones:
Cryptocurrencies are still in their infancy
Cryptocurrencies have been covered extensively in the media for several years. Even if this is true, the market is still small when compared to fiat currency and precious metals. Bitcoin’s market capitalization reached slightly more than $1 trillion at its zenith. A $7.9 trillion Gold market worth was overshadowed by a $28 trillion stock market United States value.
Because of the market’s tiny size, minor market movements have a bigger influence on the price of commodities. If a banking consortium decides to sell $500 million worth of Gold, the price of gold will stay quite steady. If the price of Bitcoin declines, it can disrupt the whole market and cause havoc on the price of other cryptocurrencies.
Nonetheless, it is undeniable that the crypto industry will continue to flourish in the future, bringing with it unique and inventive developments.
Cryptocurrencies are well-known for being volatile
The value of cryptocurrencies may be highly volatile at times. Not only does cryptocurrency require stability, but so does everything else. It should be as stable as feasible, with as little fluctuation in price as possible daily.
The rise of cryptocurrencies, on the other hand, has been met with considerable skepticism. The vast majority of people continue to mistrust that cryptocurrency can be used as regular money, mostly because they are concerned that its value may plummet overnight.
There’s still more to come. Conventional monetary services such as currency conversion, ATMs, and remittances are extremely difficult to access as a result of the constantly shifting exchange rates. Businesses will be forced to mitigate risk by imposing exorbitant costs on their customers.
This, however, contradicts the point of cryptocurrencies in the first place. Payment choices are more inexpensive and customizable than they have been in the past. Regulators will not assist the cryptocurrency industry until the value of their currency has grown more stable, according to the Financial Times.
Purchase Today, Sell Tomorrow
Following the crypto-boom of 2017, financial advisors suggested that investors consider Bitcoin and other cryptocurrencies as a viable investment option. Despite this, several big crypto-brokering businesses announced before the end of 2018 that they will prohibit the trading of crypto-assets owing to their perceived overly speculative character. This technique was successful in bringing back the expected crypto market investors to the market.
Learning that if you invest in Bitcoin today, you would be able to save yourself from inflation in ten years is a disturbing thought. A large number of short-term investors are continuing to buy cryptocurrency, which is undermining the market’s overall stability.
Cryptocurrency-related crimes continue to be widespread
The value of cryptocurrencies is increasing all the time. Because they are held accountable for their actions, regulators face a difficult task in eliminating their usage in internet fraud and money laundering.
Fraud, theft, and ransomware were the most prevalent cryptocurrency crimes in 2020, according to the FBI. Approximately a quarter of the $129 million in damages resulted from security breaches involving decentralized finance, in which operators who promote lending outside of banks were targeted (DeFi).
However, despite the efforts of market players to maintain security, losses from cryptocurrency theft, hackers, and fraud surged by 33% to $2.2 billion in 2017, as criminal activity in decentralized finance grew in popularity and scale. Decentralized financial services have become increasingly tempting to criminals as a result of a lack of regulatory oversight.
Following the euphoria of institutional investors, cryptocurrencies entered a new era, reaching new all-time highs in the process. To establish the most effective means of taxing and regulating cryptocurrencies, the government is now conducting a study. Due to a lack of well-defined standards and rules, it is doubtful that regulatory watchdogs for cryptocurrencies would be established.
It is essential to be patient
The future of cryptocurrencies is uncertain since they are not limited by the forces of the market. Although this is the case, a few well-known cryptocurrencies have placed their faith in techniques that point them on a specific path.
Because of the high price of cryptocurrencies, it may appear that they should be marketed; nevertheless, doing so at this stage would be a mistake. Money must be allowed to evolve and advance in lockstep with the rest of humanity. To keep money or make regular payments in cryptos will be difficult until they achieve a level of stability that is acceptable to all parties.
The global environment is always changing, and the globe is changing at a faster rate than at any other time in human history. As a result of the fast acceptance of cryptocurrencies, traditional financial institutions will be unable to compete effectively in the marketplace. However, to attain complete social and financial inclusion, the world must remove all barriers as soon as possible. To overcome these challenges, our technology is best suited.
We have waited far too long for these cryptocurrencies to be integrated into our lives and to have a bigger influence on our lives as a result of a greater emphasis on economic growth and inclusion. Cryptocurrency watchdogs will keep an eye on the situation and work to fix any crypto-related concerns that may develop as a result.
In general, watchdogs have a tough time adopting the digital currency. This trend is likely to persist for some time, at least until the sector develops and begins to diversify. In their infancy, cryptocurrencies are renowned for their extreme volatility, which makes them a good investment. Other institutions have attempted to address concerns relating to crime, which is a common thread that runs through all of them.
Furthermore, the vast majority of people who acquire them do so to earn rather than conserve for a rainy day. As long as such concerns are not addressed, watchdogs will stay on the sidelines. It is, on the other hand, impossible to know. Most likely, within a few years, they will be among the pioneers who contribute to the movement toward mainstream acceptance of cryptocurrencies.