Uncertainty with regulation in the cryptocurrency market is stifling innovation, growth, and adoption.
A free market is one that allows not only great success, but great failure. Herein lies the problem with the cryptocurrency industry. It is an industry that by its own nature is inherently volatile and risky, especially now as it is a relatively small market and is subject to large swings in value and volume, unlike much more established markets.
A bad investment in cryptocurrency is a whole other level of hurt compared to a bad one in the stock market, for example. It's not unusual for certain currencies, or even for the entire crypto market as a whole, to drop 10% in value on a given day in crypto. This would be devastating on the stock market because of the scale of the market in comparison. The crypto market, in its entirety, holds a market capitalisation of less than half a billion dollars. The world's stock markets? Somewhere nearing $100 trillion. Yeah. That's a whole lot bigger. 10% of 100 trillion dollars would be a serious global meltdown.
Whereas the stock market has experienced decades of growth to become established and broadly liquid around the world, the crypto market is infantile in comparison. Keep in mind, however, that if you simply compress the movements of the stock market down into a shorter time frame, they start to look an awful lot like the crypto market. It's as if the crypto market is simply moving in ultra fast-motion in comparison, but other than that, the patterns are strikingly similar.
Knowing these factors, it becomes easier to understand why the market is capable of moving up and down such massive percentages in such short time. And it is because of this rapid movement that the crypto market appears dangerous - too risky for institutional investment, supposedly. By the time a signal is known to the public in the cryptocurrency market, it's usually too late to jump in without risking riding red candles back down to previous dips. This makes it much tougher to time and to react to the market with any kind of success in short time spans.
This will take some adjustment as crypto grows in popularity and acceptance. But regulation that is meant to fit the world of slow-motion stocks simply will not cut it in this world. Economic uncertainty that can slow stocks is exponentially more detrimental in the hyperactive movement of crypto.
What regulators looking at cryptocurrency need to realize is this: this is a different world. The same rules and regulations of the old economy will not work in this space. Companies and their investors must be allowed to innovate and flourish, or flounder and fail. The wheat will be separated from the chaff in short order if allowed to do so. And it won't take decades to sort things out like it does in the stock market.
A global free market approach is the best way to allow this new economy to grow up for the broadest benefits to the most people.
*This is not professional trading advice - it's just my opinion!
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image source:
https://cei.org/content/model-rolling-back-outdated-regulations