Bitcoin’s volatile past week captured the attention of market observers, with many in the crypto community surprised to see Sunday’s market drop resulting in a sub-$7K BTC price. Despite the recent volatility, there have been multiple recent announcements from large-scale crypto exchange platforms seeking to cement regulatory relationships with the SEC.
The often-touted entrance of institutional capital into the cryptocurrency market has been promoted as a potential bull run catalyst since the first quarter of 2017. However, despite announcements such as the opening of a Bitcoin futures trading desk by Goldman Sachs, institutional capital is yet to make a notable impact.
Shift Toward Regulatory Compliance
The entrance of institutional capital enticed by the regulatory maturation of platforms such as Coinbase — who recently launched a suite of products aimed at institutional investors — is set to catalyze a bull run, according to cryptocurrency investing app eToro managing director Iqbal Gandham who told The Independent:
“As the regulatory landscape clears up we can expect far more investors, including big-ticket institutions, to make their first cryptocurrency investments. For the first few months of this year, the crypto industry has been jogging along at a relatively slow pace, waiting for the opportunity to stretch into a sprint. This may just be that moment.”
Coinbase announced that the platform is “on track” for SEC registration, legitimizing the exchange as a broker-dealer “capable of offering blockchain-based securities.”
Goldman Sachs-backed cryptocurrency startup Circle also expressed intent to pursue a federal banking license and registration as a securities exchange in a recent interview with Bloomberg. Circle CEO Jeremy Allaire stated that the platform hopes to become the first federally-licensed crypto startup:
“To hold reserves with the Federal Reserve, to natively access the central-banking system without intermediaries, to directly settle with other banks in other markets around the world through those networks — that can improve the efficiency of what we deliver, it can reduce the costs.”
Regulatory Compliance Necessary
Fundstrat Analyst and Bitcoin bull, Tom Lee, predicted a significant positive price shift resulting from the move toward regulatory compliance. The rush toward SEC licensing and the establishment of a fully-regulated platform, states Lee, is an “implicit acknowledgment” that regulatory perspective is swinging toward the positive.
“We believe the regulatory picture is now improving — best evidenced by Coinbase and Circle ‘running towards’ regulation. We are basing this on the notion that Coinbase and Circle would only take these actions if such was the case.”
David Hanson, the CEO of new blockchain-based gaming platform Ultra, predicted a fluctuating Bitcoin value and price spike over the coming weeks:
“I believe Bitcoin’s price will continue to fluctuate between $6,500 and $8,500 in the coming weeks. In the medium-to-long term, bitcoin’s value should go up, as big institutions enter the crypto space in a bid to gain first-mover advantage, further legitimizing the market.”
The establishment of fully-regulatory compliant exchange platforms is necessary for continued retail investor adoption and institutional investment.
Additionally, the potential implementation of technical improvements like Schnorr signatures — a restructuring of the signature process that could improve the efficiency of validating Bitcoin transactions — could deliver a boost to scalability, accelerating mainstream adoption as the Bitcoin blockchain inches closer to competing with existing large-scale payment platforms.
Cover Photo by Martin Adams on Unsplash