Regulation could ‘unlock’ crypto market

The same way people are investing in sustainable energies for a cleaner future, they are investing in cryptocurrencies in hope of better financial ecosystem and this will be helped by clear regulation.

A BetaShares webinar about the firm’s Crypto Innovators exchange traded fund (ETF) discussed the effect cryptocurrency was having on traditional financial systems.

Matt Hougan, chief investment officer at Bitwise which was the index provider for the ETF, said: “Just like battery-powered cars consume less gas than gas-powered ones, the crypto economy is making the same transition.

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“People who are investing in crypto today are doing so with the belief that having an alternative monetary system, a more efficient system, lower cost of transacting and ability to automate certain transactions is a valuable service”.

He said, contrary to expectations, stronger regulation would work in cryptocurrency’s favour, although it would depend on how strict it is. The regulatory risk was balanced out by the potential for regulation to unlock its full potential.

“Clearer and better regulation is key to unlocking the future of crypto, it is trying to build a new and more efficient financial services industry, a more rules-based monetary policy that will have an impact on the ‘real world’. But it can’t do that without good-quality regulation,” he said.

“People worry about regulation coming in and crashing crypto but the reverse is true. As long as the regulator gets it correct and doesn’t dramatically overshoot then clear regulation is going to unlock this market.”

Although it had a strong launch, trading almost $40 million on its first day, the Crypto Innovators fund had since fallen back and had lost 8% since its launch on 4 November.

At the time, it was speculated that thematic funds often tended to fall back after initial launch as the initial outperformance of a theme had often played out by the time it came to launch a fund.

Responding to comments about the performance, Hougan said: “We have had some strong days and some more negative days. The key focus is this is a high-risk investment and therefore you will have volatility.

“The recommended investment timeframe is either long-term investors, say five-plus years, or there may be an opportunity for investors that like to trade for shorter periods and take advantage of those pullbacks to trade frequently.”

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