Expert warns of crypto collapse – Should there be regulation?

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According to Kenneth Rogoff of Harvard University, Bitcoin could go as low as $100 in the coming years making it worth only a fraction of its current value. The American economist argues that cryptocurrency isn’t as useful as many think it to be.

Bitcoin has been around for many years. However, it became popular in 2017 due to its massive price surges during the year. The digital currency made headlines almost every month and peaked at a value close to $20,000. However, many countries started to move against the inflating crypto token and started placing regulations which in turn brought the currency’s value down significantly. There also came a point where Bitcoin dropped to a value as low as $6000, by its own standards, it was a new low for Bitcoin. Currently, Bitcoin stands at $9883, still a large amount but that’s nowhere near what it once used to be.

Rogoff had this to say regarding Bitcoin:

“I think bitcoin will be worth a tiny fraction of what it is now if we’re headed out ten years from now,” Said Rogoff.
“Basically, if you take away the possibility of money laundering, tax evasion, its actual uses as a transaction vehicle are very small.”
“Some of the bitcoin advocates say ‘It’s beautiful, we’ll hold it because it’s beautiful’ I think that’s nonsense.”
“I don’t think it’s going to go down to zero because I think there will be rogue nations who feel outside the global financial system not invested in it, will still accept it.”
“But I would say $100 is being a lot more likely than $100,000 ten years from now.”

The point Mr. Rogoff is trying to make is a fair one. Apart from South Korea, most of the countries are regulating cryptocurrency now is due to people partaking in illegal practices using cryptocurrency. Money laundering is rampant in China which is why they’re making moves to ban cryptocurrency trading or at least reduce it there. Rogoff claims that apart from money laundering and other criminal activities, Bitcoin isn’t that useful as many advocates claim it to be.

If the root cause for cryptocurrency’s demise would be cracking down on people who use cryptocurrency for illegal purposes, then governments would need to place regulation. Intervention goes against the nature of cryptocurrency in general as it’s meant to be decentralized. However, it has become a necessity now due to many online scams and hackers nowadays. Thus, as Rogoff points out, if cryptocurrency were to decline, then all nations would need to collectively bring regulation and stability to markets else it won’t work. He also factors in the non-cooperation of some countries which is why he believes the value won’t fall to zero. Cryptocurrecy’s already suffering as this is the last update on the crypto market:

Is Cryptocurrency a Bubble?

According to Mr. Rogoff, the market, if regulated would benefit everyone but crypto investors who would lose a lot of money if cryptocurrency declines according to the Economist’s prediction. Yes, regulation has proven to hurt the crypto market as the market goes down after any country declares its intentions to regulate the crypto market. If a cryptocurrency recovers during a brief growth period, it immediately goes back down. Such is the case with Bitcoin, it had grown back to $11,000 but is now below $10,000 again (at the time of this writing). Thus, it raises the question that whether cryptocurrency was actually a bubble all this time which is close to bursting.

One expert believes this way. According to the governor of the Bank of England Mark Carney, cryptocurrency is the prime example of a Bubble which attracts more ‘fools’.
Mr. Carney believes that it’s time that crypto also be considered a legitimate financial system thus the same standards, priveledges, and responsibilities should apply to it.

“In my view, holding crypto asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.”

Should there be regulation?

Mr. Carney’s recent words call for regulation of the cryptocurrency market. However, contrary to what many would think; many crypto advocates welcome the aspect of regulation in the cryptocurrency market. For some, regulation will help improve the cryptocurrency market and will thus help it reach even greater heights. Strict regulation would keep people who look to use cryptocurrency for illegal and criminal activities out of the market. The whole market will likely decline as well due to strict regulations imposed by many governments, which will eventually drive out those crypto investors who are there to make a profit. This would drive the value of crypto tokens down even further.

Eventually, the crypto would become affordable again for many people who want to actually use it for the things different crypto tokens were made for. For example, people will likely stop holding Ripple hoping it grows more than 40,000% again, instead they’ll be able to buy Ripple as a cross-border payment solution like it was intended to be. Thus, regulations and the crypto decline would actually help the cryptocurrency market in the long run.

Not only will it result in the sustainable and realistic growth rate for different currencies, but it can improve the competition amongst them as well. For example, Bitcoin has long been criticized for its long transaction times and expensive transaction costs. However, nothing was implemented on Bitcoin’s side since it was booming regardless. Now that altcoins have started to grow and even catch up to Bitcoin to some extent, Bitcoin has announced an upgrade to the Lightning Network which should solve its transaction time and cost problems.

There is also support for regulation from Nigel Green, founder, and CEO of deVere Group who believes that the time is ripe for the crypto market to be regulated. According to him, the Bank of England’s approach is practical. He says:

“The Bank of England is one of the world’s most influential central banks and, as such, its approach is likely to help shape the policies of others.”

Therefore, yes, what Mr. Rogoff proposes is almost equally likely to happen as compared to the positive effects of regulation. The chances are almost equal due to the uncertain nature of the crypto market. It is true that the market has suffered due to regulation, however, the possible benefits for the long run can’t be overlooked.

 

 

 

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