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What would regulation mean for the price of crypto?

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For anyone outside the world of cryptocurrency and plenty of people on the inside, the world of digital assets can easily take on the image of something resembling the Wild West. If you’re not particularly tuned in to reading and hearing crypto information on a daily basis, then most of what you will have heard in 2022 will be “Bitcoin crash … Ethereum crash … Luna crash … Bitcoin crash again” – and it’s easy, in that light, to think that only a fool would invest in cryptocurrencies.

Dig a little deeper, and of course the picture is a lot more nuanced than the surface may show. However, for an asset class that depends as heavily on market sentiment as crypto does, the outside perception inevitably does matter. Like it or not, it affects the performance of every crypto coin from Bitcoin downwards.

This is why the idea of crypto regulation arises time and again, and why world leaders are taking notice of the issue. Some crypto holders resist the idea of their coins ever being regulated or taxed – but is it wise to reject the idea out of hand? Some theories suggest that market regulation wouldn’t be such a bad thing…

Why some crypto traders and supporters want regulation

While the unregulated, volatile nature of crypto is seen by some coin holders as being part of the “game”, part of what makes crypto what it is, this is far from a uniform opinion. Leaders of crypto lending and investment funds have expressed their belief that regulation isn’t just welcome, it’s necessary. Whether you’re holding it in a wallet or using it to fund a Bitcoin live casino account, a currency can only gain any stability if it has transparency. Transparency means a need to make disclosures, and only regulation will make those disclosures obligatory.

What will it do for the price of crypto?

In some ways, it is impossible to know exactly how any new moves will affect crypto, because it is a new asset, comparatively speaking. We don’t have historic data on what has happened when the largest economy in the world moves to regulate crypto, because it has never happened before. So we’re left with the best guess, which is that without reporting and trading regulations, it’s likely that price drops will continue. That type of volatility in turn makes major institutions less likely to invest considerable amounts, which can only hurt the price of assets going forward.

What does this mean to investors?

What does this mean to investors

For some crypto investors, price fluctuations are beneficial. If you can time your buying and selling smartly, then you can make money buying the dip and then selling when the coin rebounds past the price at which you bought it. As long as there are people around prepared to buy when it’s heating up, there will always be price spikes. With that said, every time someone gets burned by a price drop, that’s someone who isn’t going to buy again. In the end, the boom and bust cycle can end up being one long bust. So it might be worth looking at the potential benefits of regulation if you want to make effective investments in future.

Opinions will continue to be divided – and with good reason – on the topic of regulation. But even if you have generally been against the idea in the past, it’s worth thinking about how the future may pan out. Regulation may well be coming one way or the other, and it is worth keeping an eye on exactly what that looks like so you’re prepared to deal with it when the time comes.

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