Tales from the Crypto: Feed Bitcoin more money, not less, says Goldman exec

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The week so far in the crypto space has been something of a volatile one as the ongoing status of Bitcoin continues to dominate the headlines.

After grabbing attention recently after surging to fresh highs, alarm bells are likely to have gone off on a more than few trading screens on Monday suffered a sharp decline, tumbling to around US$30,000 from US$40,000 in a single day and wiping out pretty much all of its gains since the start of the month.

While the price has recovered since then (Bitcoin is trading at around US$38,900 as of time of writing), the sudden drop may have some of the crypto market’s veterans worrying that Bitcoin could be in for a repeat of its price crash in late 2017, which saw the currency soar to a then-record high of over US$19,000 before plunging to less than half that less than two months later.

However, while many may be thinking now may be the time to take their profits and get out, an executive at Goldman Sachs has said institutional investors should instead shovel more money into the coin to prevent such swings in the future.

On Tuesday, the vampire squid’s head of commodities research Jeff Currie told CNBC that the Bitcoin market is “beginning to become more mature” and more cash was needed from institutions to prevent massive price swings in the future.

“The key to creating some type of stability in the market is to see an increase in the participation of institutional investors and right now they’re small”, Currie said, adding that institutional money only made up “roughly 1%” of the more than US$600bn currently invested in Bitcoin.

However, with major tech firms such as PayPal Inc (NASDAQ:PYPL) offering customers the option to pay in Bitcoin and analysts at JP Morgan forecasting the price of the crypto could reach US$146,000 in the long-term, the floodgates for institutional cash may just be starting to open.

Less of that funny business, says Lagarde

Meanwhile, on the other side of the Atlantic Bitcoin is once again finding itself under pressure from regulators, with current European Central Bank (ECB) head and scarf enthusiast Christine Lagarde calling for global regulation of the cryptocurrency.

Speaking to the Reuters Next conference on Wednesday, Lagarde said the cryptocurrency has been involved in “some funny business” as well as “some interesting and totally reprehensible money laundering activity” and that any loopholes in regulation needed to be closed to prevent similar activity in the future.

The ECB boss went on to say Bitcoin as still a “highly speculative asset”, a view echoed this week by the UK’s Financial Conduct Authority (FCA), which warned crypto investors that they should be “prepared to lose all their money” if they parked it in digital assets.

But how can we regulate it?, says HM Treasury

Speaking of regulation, the UK Treasury has taken something of a different tack in its approach to the crypto industry, announcing a consultation on Tuesday to solicit opinions on the government’s regulatory approach to crypto and stablecoins, digital tokens that derive their value from other assets such as gold or fiat currency.

The consultation document said it is aiming to ensure any regulations are “equipped to harness the benefits of new technologies, supporting innovation and competition, while mitigating risks to consumers and stability”, perhaps a more conciliatory approach than Lagarde’s advice to stop all this funny business going on.

Echoing the FCA, the Treasury also said that the current situation of crypto assets falling outside of regulatory oversight “may prevent benefits from being realised and exposes consumers to potential harms and, depending on prevalence and value transferred, could pose financial stability and consumer risks”.

Responses to the consultation are accepted until March 21 this year, meaning the days of the crypto “Wild West”, at least in the UK, could be numbered.

Published at Fri, 15 Jan 2021 11:54:00 +0000 Tales from the Crypto: Feed Bitcoin more money, not less, says Goldman exec

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