Bitcoin, number one digital currency, is currently suffering drops in price. Jonathan Cheesman, a partner at investment firm Distributed Global, has provided an explanation for Bitcoin decline. According to Jonathan Cheesman, macro trend, speculative dominance, regulatory uncertainty, short selling, and scams are the reasons why Bitcoin has fallen.
Cheesman explained that regulation and infrastructure of the digital currencies as a valid asset class are improving, that’s why more and more investors recognize cryptocurrencies as secure and legitimate stores of value. He said:
“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.”
Cheeseman explained that until 2018, there was no infrastructure targeted at institutional investors and large-scale retail traders. Moreover, there was a lack of publicly tradable instruments that could facilitate the demand for cryptocurrencies from accredited investors. That’s why large sums of capital were prevented from flowing the broader financial market to the cryptocurrency sector.
This year, the world has seen a bubble in the crypto-market, similar to ones in 2012 and 2016. Ongoing corrections in those bubbles were set-off by panic of investors and speculators in the markets. About 80% of the correction followed the previous pattern, but the recovery will differ from the past.
Earlier, Bitcoin had failed to secure momentum at major support levels and demonstrated no signs of recovery for over two years. This year, 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.
Currently, the crypto market is experiencing a crypto-inclusion trend. The regulatory framework and the infrastructure which are focused on custodianship are quite positive. They will encourage more institutions to embrace the crypto-market despite being a fledgling. Cheesman concluded:
“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.”