Will The Crypto Crash Produce A Better Crypto Future?

The margin requirement for Bitcoin futures trading on CME is 50% of the contract amount, which means the investor must deposit $25,000 as margin. The industry will need to improve in this area to achieve widespread adoption, Hume said. On the other hand, many are also concerned that cryptocurrency regulation could effectively limit its peer-to-peer nature, which attracted early investors.

For this reason, support for regulation is not directed at governments, but at payment companies and the stock exchanges themselves. While many consumers are wary of industries that are allowed to self-regulate, in this case they see it as a possible solution to the unique risks of crypto regulation. On the one hand, many investors believe that more regulation could legitimize the burgeoning market, allowing more companies to accept digital currencies, increase their value and security against fraud, while reducing volatility and criminal activity. Cash, credit and debit cards are slowly becoming obsolete and may continue on this path, as the acceptance of cryptocurrencies increases.

Fiat currency issuance is a highly centralized activity overseen by a country’s central bank. Although the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuances. In addition, local currency deposits are usually insured against bank failures by a government agency. The value of a Bitcoin depends entirely on what investors are willing to pay for it at any given time. Also, if a Bitcoin exchange folds, customers with Bitcoin balances have no recourse to get them back. The first Bitcoin futures contracts were listed on Cboe in early December 2017, but were soon suspended.

The cryptocurrency winter, with the prices of most crypto assets falling in recent months, has shed a harsh light on the vulnerability of Bitcoin and other crypto assets as a store of value. The idea that, unlike other risky assets, they will be immune to changes in interest rates or serve as a hedge against inflation has faded. Stocks have certainly taken a beating lately, but the cryptocurrency slump has been low market cap crypto even more drastic. The price of Bitcoin has fallen by about two-thirds since its peak in November 2021, and the total market value of all cryptocurrencies has plummeted from about $3 trillion to less than $1 trillion. Even stablecoins, cryptocurrencies that are apparently backed by dollar reserves, and other financial assets that are supposed to help keep their value stable, proved fragile amid the recession.

Thirteen years ago, cryptocurrency recruited users out of a desire to shake up the exclusive and institutionalized financial world; create a widely accessible way to move money and pay for goods and services, regardless of individual circumstances. While a larger pool of investments represents greater potential for everyday investors, greater institutional engagement also threatens the ability of digital currencies to operate outside of traditional finance. But another motivation for investing in cryptocurrencies may be the belief in their transformative nature, the idea that cryptocurrencies will eventually replace traditional forms of financial exchange. We can speculate on what value cryptocurrency may have for investors in the coming months and years, but the reality is that it is still a new and speculative investment, without much history on which predictions can be based.

In a volatile ecosystem with wild price fluctuations, this is an important point. Bitcoin futures contracts on CME are regulated by the Commodity Futures Trading Commission. This provides a degree of confidence and appeal to institutional investors, who make up the majority of traders in such contracts.