From interest from the Nasdaq to tightening CFTC regulation - which will return cryptocurrency to growth.
The May drop in the crypto market forced many investors to think about whether they should continue to adhere to the HODL strategy or whether it is time to get rid of their assets.
However, many cryptoexperts remain in bull positions. They are confident that the market is waiting for a further rise, and for this there are five reasons.
1. Cryptocurrencies appear on Nasdaq
The market has taken a huge, but undervalued step towards the cryptocurrency legitimization: the Nasdaq Stock Exchange said it is considering the possibility of cryptocurrency exchange. It is clear that the entry into the industry of such a well-known and respected organization is a major step forward (although regulation still remains a stumbling block).
Nasdaq CEO Adena Friedman said in an interview with CNBC: “I believe that digital currencies are not going anywhere, the only question is how long this market will take to mature. As soon as it seems that a regulated market is possible and necessary here, the Nasdaq will, of course, consider this possibility. ”
There are other good news: Nasdaq is also considering the possibility of collaboration with Gemini Wiploss twins, who were at the forefront of Facebook. Gemini is an advanced exchange that pays a lot of attention to security and identifying fraudsters.
The exchange has already implemented Nasdaq technology called SMARTS, which allows you to track all transactions. Curiously, SMARTS will also be used to determine the estimated price of BTC / XBT futures traded on CBOE.
Valerie Banner-Turner of Nasdaq explained in a press release: “Gemini is a supporter of transparency and thoughtful regulation of cryptocurrency markets, and we, as a platform operator and technology partner, share these views. Gemini is regulated by the New York State Department of Financial Services (NYSDFS) and adheres to the highest standards for capital reserves. This is an important milestone in the application of SMARTS - and the next step in our strategy of spreading our technologies in non-traditional markets and even beyond the capital markets. ”
At the current stage of development of the cryptocurrency market, a platform with strict rules is welcome.
2. CFTC tightens the nuts
The Commodity Futures Trading Commission (CFTC) was the first US regulator to step in and issue cryptocurrency derivatives guidelines for exchanges and clearinghouses.
21 may, at the conference of the Association of Securities Administrators of North America, CFTC Chairman Christopher Giancarlo said: “In the next few days, recommendations will be published on the CFTC website for specific measures to be taken when placing a derivative contract based on virtual currency on the exchange.”
He further added: “During the consultations, we will explain our priorities and expectations when analyzing new derivatives of virtual currencies traded on the stock exchange. These clarifications will reflect the current position of CFTC employees based on our growing experience with virtual currency derivatives. As new products become available, staff will revise recommendations as needed to solve emerging problems. ”
The participation of CFTC is another huge step in creating a cryptocurrency ecosystem capable of attracting large investments. And that brings us to the next event.
More recently, the CFTC and the US Department of Justice announced that they would investigate cases of fraud, as well as cases of manipulation of cryptocurrency rates. Although the CFTC is primarily focused on derivatives, such as bitcoin futures, the Commission may also investigate cases of irregularities in trading on spot markets.
This announcement triggered a sell-off in cryptocurrency markets, but in the long run, this is great news.
3. Institutional investors take action
Until recently, investment in cryptocurrency was primarily an individual occupation, and large institutional management companies and hedge funds avoided this class of assets due to the lack of regulation and superhigh risk.
However, the situation is changing rapidly. One example: fintech-company Circle, owned by Goldman Sachs, buys the Poloniex exchange. Circle plans to expand the platform and use it to trade tokenized assets, which, in turn, are designed to provide more natural management of existing assets. This opens up opportunities for banks and other organizations that can work with virtual currencies as ordinary assets.
Cryptocurrency exchange Coinbase, in turn, launched four new products aimed at the money management market:
- Coinbase Custody - by design, it is the safest cryptocurrency storage solution in the world. Coinbase Custody also adds the possibility of third-party auditing, including the performance of a depositary broker regulated by the Securities and Exchange Commission;
- Coinbase Markets - a local data center that provides low latency and greater liquidity (all for institutional activity);
- Coinbase Prime is an institutional level trading platform that provides a set of necessary trading tools;
- Coinbase Institutional Coverage Group - this function adds to the Coinbase offer for institutional investors a sales function, as well as market research and operations.
In addition, a recent study by Reuters showed that every fifth financial institution is considering the possibility of trading cryptocurrencies.
With the arrival of institutional money is associated such optimism, because we are talking about huge amounts of money. Even if a small percentage of managers gradually begin to add cryptoactives to their portfolios, the market will simply explode.
4. Central banks show interest in cryptocurrencies
More important is the interest in cryptocurrency by central banks. While we are at the very beginning of this path, but in the long run it is a very positive sign of the viability of cryptocurrencies.
5. Sell-out
Yes, that's right, the May sale can be considered a very positive signal. The market never goes straight up - if it is healthy, it grows first, then retreats, and then rises again. Profit taking is a natural part of the market process.
In cryptomir, everyone follows the leader, that is, bitcoin, and, most likely, the introduction of futures contracts for bitcoin has caused the current sale. So says the Federal Reserve Bank of San Francisco.
In a letter from 7 in May, the bank compared the emergence of Bitcoin futures and the subsequent sale of the underlying instrument (that is, Bitcoin) with the creation of instruments that allow investors to bet against the housing market and its further collapse. The same thing, according to the authors of the letter, happened to bond securitization at the beginning of 2000.
And all this is the way to a mature market!