Fundstrat Global Advisors has recently released a report backing the recent regulatory action in the crypto market. Fundstrat strategists – David Grider, Ken Xuan, and Tom Lee – wrote that regulatory clean-up is positive to ensure a free-market-oriented atmosphere in the crypto space.
Regulators are active back again in the cryptocurrency market with a string of measures in the last few weeks. Last week, the U.S. CFTC slapped charges on BitMEX crypto exchanges for facilitating illegal cryptocurrency derivates trading and failing to implement anti-money-laundering measures. Earlier this week, U.K’s top regulator – Financial Conduct Authority (FCA) – banned crypto derivatives trading for retail investors. Commenting on it, the Fundstrat strategists wrote:
“Actions unsurprisingly indicate U.S. and global regulators are committed to stomping out illicit activity, securities violations, money laundering, price manipulation, and noncompliance with banking regulations. On balance, we view recent news as a positive for crypto markets, despite select smaller pockets of risk, and we believe the prevailing bull market trend is intact.”
Fundstrat Investors Warn of Underlying Risks in DeFi Market
The Fundstrat strategists also cautioned about the risks in the recently popular decentralized finance (DeFi) market. The strategists noted that the recent spurt in DeFi protocols comes at the cost of lack in regulatory procedures like KYC and anti-money-laundering. They wrote that the projects in the DeFi space are “worth watching closely”.
Last month itself, liquidity mining protocol Yfdexf.Finance suddenly exited the market defrauding investors of $20 million. Some analysts have also warned that DeFi space can turn out to be just like the ICO bubble of 2017. In its latest post, Forbes asks investors and liquidity farmers to beware of projects promising unrealistic returns & APR of 3000%.
99.99% of DeFi tokens on the market are scams designed to steal your wealth.
Anyone who disagrees likely wasn’t around during the last ICO bubble which resulted in 99.99% of coins popping, and crashing over 99%
— CryptoWhale (@CryptoWhale) September 10, 2020
Adding more about the offshore exchanges as reported by Bloomberg, the strategists wrote:
“We see offshore quasi equity exchange tokens as an area of risk that investors may be underappreciating as some have had a history of compliance allegations”. We “see further risks with crypto tokens exclusively listed on offshore exchanges where stricter U.S. investor prohibitions could limit liquidity and demand.”
Regulators have been vocal about the stand on the crypto market. Speaking at the LA Blockchain Summit 2020, SEC Chairman Jay Clayton said that they are open to crypto innovation, but won’t spare anyone who tries to play around. Other crypto proponents have also backed the recent regulatory action.
CFTC is wrecking BitMEX for wrecking Bitcoiners. It's a necessary clean up step before an ETF can be approved. This is one of those "the herd is coming" events.
— Willy Woo (@woonomic) October 2, 2020