The legal battles between the SEC, Bitcoin and cryptocurrency companies continues to heat up. Over the years, the US government criticized the new peer-to-peer (P2P) economic model for a variety of reasons. The latest battle centers around exchange traded funds (ETF).
Bitcoin found itself in the SEC’s good graces recently. The allowance of Bitcoin futures trading was seen as a big win by crypto enthusiasts. Many experts expected ETFs to soon follow. However, the SEC pulled the reins on the ETF endeavor that is believed to be one of the primary hurdles leading to mass adoption.
While the SEC was inhibiting the growth of Bitcoin, Forbes reported that both Bitcoin and Ethereum saw significantly higher prices. Ironically, the day that Bitcoin futures began trading with standardized payment settlements, the price of Bitcoin did not react very much.
The cryptocurrency market is complex. It is also still very small. Because of its size, the crypto market is significantly impacted by existing financial markets. Thus, the price of Bitcoin will mirror the major indexes and the price of alt coins (non-Bitcoin blockchains) will mostly fall in line behind Bitcoin. There is usually a few coins that go against the grain, but a large percentage of the crypto market falls or rallies with the rest of the financial world.
Considering the price similarities of the markets, one might expect cryptocurrencies to one day be absorbed by the existing financial system. The complexity of cryptocurrencies make this a highly unlikely outcome. While crypto is considered its own market at the moment, the ultimate end is as a mechanism to assign value to assets. Thus, crypto tech will adjunct existing markets more than directly compete with them.
Fiat currencies are not assigned to particular assets. Bitcoin is probably more like money than any cryptocurrency other than stable coins. It’s even compared to gold. Unlike gold however, Bitcoin can be programmed. This is the purpose behind the smart contracts that Ethereum introduced. Programs are not confined to any single market. And, this is probably the most significant reason why cryptocurrencies will one day rise and fall independently of the traditional marketplace.
Today, the SEC’s main concern is preventing market manipulation. For the cryptocurrency community, the interest in ETFs is one of mass adoption. Allowing access to trading in the way would reduce much of the cumbersome technical hurdles that crypto investors faces today.
