Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Why is Crypto Space Referred to as the Wild West?
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Bitcoin and cryptocurrencies have become a $2 trillion asset class in a little over a decade, showing that they hold the potential to disrupt the legacy banking system.
However, cryptocurrencies can’t seem to shake their reputation as the “wild west,” a lawless space riddled with scams that lacks any regulatory oversight.
That said, things could soon change as a growing appetite from institutional investors applies pressure on regulators to accept crypto as a viable financial system. This guide examines why most financial watchdogs associate crypto with the “wild west” and why regulators need to abandon that notion.
The Notorious Volatility of Crypto Assets
The crypto world’s reputation as the Wild West primarily comes from its notorious volatility of digital assets that have seen traders lose their money while dabbling with the unpredictable asset class.
The wild price swings in bitcoin, the leading cryptocurrency, have seen the coin’s value plummet by over 50% in just three months. Such stormy price action makes long exposure very risky and has led some investors and regulators to consider the asset class too wild.
Moreover, the crypto asset industry is still very immature. Case in point, even a single tweet from pot-stirrer and SpaceX CEO Elon Musk is often enough to move prices of multiple tokens.
This unpredictability in prices threatens to render BTC useless as a reliable means of transactions and a future global currency. Big players such as Fidelity Digital Assets have cited the wild volatility for their decision to offer crypto exposure only to wealthy institutional investors, leaving retail investors on the sidelines.
Other major financial institutions such as HSBC, Europe’s largest bank, have opted to stay out of the volatile crypto market altogether, citing concerns over volatility.
Questions Surrounding Crypto Regulation
One of the biggest hurdles crypto must surmount before gaining mass adoption is the fragmented regulation and poor infrastructure.
Rules on crypto remain underdeveloped worldwide, with prominent regulators vowing to clamp down on the current “Wild West” situation in crypto-trading markets.
Per a report from CNBC, UK lawmakers are working on introducing a regulatory framework that would make the jurisdiction an international hub for legitimate digital currencies trading. Over the past few years, the UK government has abandoned its ambiguous stance on crypto and adoption reforms that address issues of poor security, volatility, and anonymity surrounding the asset class.
Gary Gensler, the US Securities and Exchange Commission (SEC) head, issued a damning statement calling crypto the Wild West. The SEC chair asserted that the nascent space is rife with scams and fraud, vowing to institute measures to guarantee investor protection.
Gensler believes that sound regulation is instrumental to the crypto space’s evolution. Other industry experts such as FTX CEO Sam Bankman-Fried agree that more oversight is needed to close regulatory gaps and encourage innovations in the crypto sector.
Governments Are Terrified of Decentralization
The main reason governments fear cryptocurrencies like bitcoin is that they can’t control the monetary policy of the decentralized asset class.
Governments have long had the power to control central bank-issued currencies like the Dollar, Yuan, and Euro. The Centralized financial entities aid governments in tracking the movement of money and instilling strict capital controls. Central authorities also enjoy the capacity to print money at will, effectively leading to rampant inflation over the years.
Most governments don’t like decentralized digital money because the invention robs them of the power to control the currency system and maintain their stranglehold on the global economy.
Governments and regulators also cite anonymity as a reason behind their anti-crypto stance. They claim that criminals primarily use digital assets to get around the law and finance illicit activities, a myth that has been debunked on many occasions.
Crypto is Far from Being the Wild West
Despite global regulators branding crypto as the Wild West, many individuals from across the globe continue to hail it as a haven that offers freedom from the shackles of the traditional financial system.
Indeed, millions of market participants have embraced the asset class and are applauding the long-awaited great reset to the current monetary system.
Bitcoin, Satoshi’s invention, and the bout of crypto projects that have emerged in the past decade have satisfied the growing appetite for a more inclusive and transparent global financial system.
The crypto sector introduces a new investment option, decentralized lending, and borrowing for the first time. For instance, the blossoming DeFi ecosystem is disrupting the traditional financial landscape dominated by banks, with the tech gaining more use cases exponentially across multiple sectors.
The crypto-verse offers innovative new functionalities in peer-to-peer transactions, instant, low-cost remittance, and interest staking, among many others.
Despite regulators trying to pin illicit activity on bitcoin, the reality is quite different. Traditional finance has over the decades failed to eradicate tactics employed by malicious actors such as money launderers, fraudsters, and terrorists.
However, crypto offers immutable records powered by decentralized ledger technology that holds the promise of eradicating corruption while radically boosting the ability of law enforcement to track criminals.
According to Kristin Smith, the Blockchain Association Executive Director, the crypto economy is not the wild west. He argues that the digital assets sector is far from unregulated, with the market being overseen by centralized authorities such as the CFTC.
What’s more, numerous crypto exchanges have agreed to cooperate with law enforcement and are often registered with financial watchdogs such as FinCEN and FCA.
Final Thoughts
Digital currencies are becoming an undeniable driving force in finance, offering solutions to the shortcomings of the legacy financial sector.
Yet, financial watchdogs continue to dismiss the sector as the Wild West’ because they fear digital money could undermine their authority and ability to monitor and control the economy. Governments are also scared of crypto, as its decentralized nature promises to offer millions of financial haven and make central banks redundant.
The good news is that new regulation on the horizon will likely give the crypto sector more legitimacy and draw in more financial institutions, forcing regulators to accept the asset class.
Btc
Bitcoin
$62.547
price
price
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The infrastructure within the bitcoin and crypto ecosystem is also growing as the digital asset market expands and matures. In addition, the rapid increase in the crypto market cap will likely help reduce the extreme volatility that has made many investors and regulators skeptical of the crypto world.
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