Government regulation is generally considered bad for an industry.
It often results in increased costs around compliance and increased restrictions that inhibit growth. This isn’t necessarily a bad thing — for example, creating restrictions on where manufacturers can dump dangerous chemicals means cities have cleaner drinking water.
But crypto might be the one industry that could benefit from regulation. Bitcoin peaked in November 2021 at over $64,000 per coin. Since then, it has hit prices as low as $15,760 before stabilizing around its current $23,000 level.
Crypto crashed as much as 74% — mainly because of several multibillion-dollar frauds that took place. Terra Luna was one of the first to crash, plummeting 99% and wiping out the entirety of its $45 billion in value between the crypto and stablecoins. This caused several major players in the space, including Voyager Digital, Three Arrows Capital and Celsius Network LLC, to go bankrupt, wiping out $300 billion in value in the crypto space.
The pain didn’t end there. Most recently, FTX collapsed as a result of the multibillion-dollar fraud committed by founder Sam Bankman-Fried and others. FTX, which was one of the largest exchanges in the world and invested billions into the space, regularly bailed out various players in the crypto space to prop up the industry. This further collapsed the price of Bitcoin and other cryptocurrencies and has since forced BlockFi, Genesis Global Holdco LLC and others into bankruptcy.
Crypto is no stranger to volatility. But when an exchange collapses and millions of investors have their entire investment accounts lost forever, it drives investors away.
Read also: AI is Quickly Becoming the Hottest Startup Investing Trend of 2023 – Here's How Anyone Can Get Involved
Calls for regulation: This has led political figures, advocates, billionaires and dozens of other people to call for regulation in the crypto industry. U.S. Treasury Secretary Janet Yellen called for regulation in November. When FTX collapsed, Canadian businessman, entrepreneur and “Shark Tank” star Kevin O’Leary said crypto needs regulation and noted it should be policed similar to stocks.
Another shark, billionaire Mark Cuban, has called for regulation several times — first, after getting scammed in a token called TITAN, which plunged 99% then later said the Securities and Exchange Commission (SEC) needs to enforce the rules so events like FTX don’t happen.
What happened: As fraud drives people away from crypto, regulation could be what brings get investors back to investing in it.
To stay updated with top startup investments, sign up for Benzinga’s Startup Investing & Equity Crowdfunding Newsletter
In late January, the White House released a statement urging Congress to “step up its efforts” in regulating crypto markets. The statement said the Biden administration would be releasing “priorities for digital assets research developments, which will help … protect consumers by default.”
What this means for investors: It’s unlikely any changes will be made in the short term, but the market has already recovered significantly. For those still skeptical about investing in crypto directly, startups and the stock market offer some solutions.
Gameflip is a startup raising on StartEngine, which means anyone can invest for a limited time. Gameflip is a gaming marketplace that allows gamers to buy and sell gaming assets, including non-fungible tokens (NFTs) and blockchain-based assets, with over $140 million in volume. It also has a thriving nonblockchain-based marketplace for normal gaming assets, which can act as a hedge against the volatility in the blockchain market.
Another option is Coinbase Global Inc. COIN. As the largest U.S. public crypto exchange, it offers the ability to invest directly in the crypto space. But like any crypto investment, it's not without volatility. Coinbase has fallen 78% since its initial public offering in mid-2021 but is up 121% in the past month, so investors should be prepared for volatility.
See more on startup investing from Benzinga.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
