When Bitcoin bear, Todd Colvin, the analyst at Ambrosino Brothers appeared on CNBC’s “Futures Now” none expected him to be bullish on the cryptocurrency prices. But what he told was really interesting and fundamentally could be a game changer for not just bitcoin but the whole of cryptocurrency industry.
According to Colvin, there is one thing that could turn him from bearish to bullish, clarity.
“To rally, bitcoin needs to see clarity on factors such as security, regulation and accessibility.”
The “three wheels” that could drive cryptocurrencies
If analyzed well, security, regulation, and accessibility have been the key factors that have bought to these USD 6000 levels from its peak last year. As far as security is concerned, crypto hacks have been a key pull down for cryptocurrencies.
It all started with Mt Gox but 2018 has been a vulnerable year. According to Blockchain security firm CipherTrace recently reported that $731 million worth of cryptocurrencies were stolen from crypto exchanges during the first half of 2018. Last year, crypto exchanges recorded around $266 million in losses from security breaches and heists. The first half of 2018 recorded 3 times the amount stolen from crypto exchanges in 2017, triggering investors in the cryptocurrency space to develop concerns regarding the standard of security implemented by crypto trading platforms.
This also kept the new investors away. The reason cited for the majority of these hacks were lack of full proof technology and right talent. One of the biggest hacks of 2018 was $500 million Coincheck hack in Japan. Subsequent to its hack, Coincheck self-confessed that its $500 million security breach was a result of the lack of talented and experienced developers working on the platform’s security systems.
Coincheck CEO Koichiro Wada said in an interview with Bloomberg:
“We were aware we didn’t have enough people working on internal checks, management, and system risk. We strived to expand using headhunters and agencies but ended up in this situation.”
With regards to clarity of regulation, many leading names in the crypto industry have sounded the same concern as Colvin who believe that it’s the lack of regulation that is responsible for bringing crypto prices down. One of the front-runners who believes this is Commodity Futures Trading Commission (CFTC) chairman Christopher Giancarlo.
According to him, and many others, the lack of a clear regulatory framework is the major hindrance, stopping large institutional investors from entering the virtual currency market. He was skeptical about the regulation being introduced in the immediate future, saying there are several major hurdles, hindering the process of regulators. For Colvin, a third important point that needs clarity is accessibility. To quote him
“There is a demand for this type of product. It’s just that nobody can get their hands on it “More accessibility will bring higher bitcoin prices over the long term.”
The utility is the key for each coin that is available in the market. And more the utility better the accessibility which is important for every cryptocurrency.
Steps that could convert bears to bulls
To convert bears like Todd Colvin to bulls cryptos will have to work the strengthen and get more clarity on the three “pillars” that he has raised concerns on. The world, similar to Japan and South Korea, will need to implement strict regulatory policies to establish industry standards regarding cryptocurrency exchange security.
The government of South Korea has chosen to regulate cryptocurrency exchange as banks, providing local financial agencies the authority to monitor and oversee crypto exchanges. With stricter regulations and consistent monitoring of the security systems implemented by exchanges, authorities of Japan and South Korea expect the magnitude of security breaches in the cryptocurrency sector to decline over time.
As far as talent is concerned investment in developing talent would be required. Tron and Ripple have already made such investments. As blockchain education becomes part of mainstream education things would just better. Government oversight is still up in the air, a concern to investors of a cryptocurrency that promotes its independence and lack of barriers. But if someone watches closely, regulatory and accessibility would go hand in hand. As the regulations are being worked on in certain countries the accessibility, assumed, would improve which if believed would improve regulatory in rest of the countries.
Clarity on these three factors would surely bring a paradigm shift in cryptocurrencies and would definitely bring investors faith, trust, and belief in them. This would also bring big money from institutions into cryptos as well skyrocketing the prices.
Do you think these three factors would change the fate for cryptocurrencies? How much time will it take for things to improve? Do let us know your views on the same.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.