Cryptocurrency did very well in 2021. In fact, Bitcoin hit new highs severally and received institutional buy-in from well-established companies. The same was reported about Ethereum, which recently touched a new all-time high.
However, the Biden administration and government officials are increasingly interested in new cryptocurrency regulations. Still, more people are interested in crypto, and investors, including Elon Musk, have pushed the topic further, thus creating a tremendous focus on cryptocurrency.
Indeed it’s impossible to accurately tell how the stocks in the S&P 500 will perform next month or year. The same applies to cryptocurrency because it’s an infant market and constantly evolving.
The article will review experts’ predictions to understand the crypto space and its future.
Global lawmakers are busy trying to figure how to make cryptocurrency safer by enacting laws and guidelines. Their goal is to make the industry secure for investors and difficult for cybercriminals.
Players in the crypto industry are excited about having clear regulations. Experts believe that cryptocurrencies will transform traditional finance because they support the transfer of payment with little to no cost, foreign currency fluctuations, or delays. In view of that, Bitcoin might become the world reserve currency before the end of 50 years.
However, some countries don’t recognize crypto-related activities and have even put brakes on this technology. For instance, China has banned all cryptocurrency transactions or considered them illegal since September 2021.
Although the US government’s objective is less clear, Jerome Powell, the Federal Reserve Chair, confirmed that there is no intention of banning Bitcoin. However, investors might get hurt if lawmakers will not introduce stricter regulations. Therefore, cryptocurrency regulation is necessary and should be expedited.
The Effects of Regulation on Investors
The $1.2 trillion bipartisan infrastructure bill that the president signed in November contains the cryptocurrency tax reporting provisions, which is meant to simplify the work of the IRS when tracking crypto activities in America.
Given that, experts recommend that investors with cryptocurrency assets should keep their capital gains or losses records safely because the new legislation might make it easier to report these transactions.
On the other hand, regulatory announcements might have a huge effect on the movement of cryptocurrency prices in already volatile markets. As a result of market volatility, experts recommend that investors keep their investments under 5% of their total portfolio.
Additionally, experts believe that sensible regulation is a good thing because it will give more confidence in crypto. However, experts and lawmakers should spend more time on it in order to get it right.
The Future of Cryptocurrency
Cryptocurrency is a new and speculative investment, and due to that, it’s difficult to precisely say where its value will be in the coming months or years. Actually, experts don’t have a lot of history to support their predictions.
Irrespective of what experts say or think, no one can forecast the future of crypto. Given that, investors should put what they are comfortable losing. Otherwise, people should invest more in conventional investments, which have a high chance of building their wealth in the long term.
The reason is that in the event that one developed nation ban crypto, its price will significantly drop and make the assets worthless. Investors who will have invested heavily in this space will be adversely affected. Therefore, the best decision is to keep investments small or not prioritize crypto investments over other financial goals like paying off debts or saving for retirements.
On the other hand, central bank authorities are developing regulations on cryptocurrency because digital currencies are native to the digital economy and will soon become mainstream in a few years.
So whether the cryptocurrency will last forever or not, state actors have the power to make its transactions legit or push it to a black-market commodity. Crypto and gold will have more in common in the future, so investors should not worry about its longevity.