We’ve seen Bitcoin hit multiple new all-time high prices , followed by big drops and more institutional buy-in from major companies. Ethereum, the second-biggest cryptocurrency, notched its own new all-time high recently as well. U.S. government officials and the Biden administration have increasingly expressed interest in new regulations for cryptocurrency.
All the while, people’s interest in crypto has skyrocketed: it’s a hot topic not only among investors but in popular culture too, thanks to everyone from long-standing investors like Elon Musk to that kid from your high school on Facebook.
But the industry is only in its infancy and constantly evolving. That’s a big part of why every new Bitcoin high can be easily followed by big drops. It’s difficult to predict where things are headed long-term, but in the coming months, experts are following themes from regulation to institutional adoption of crypto payments to try and get a better sense of the market.
Cryptocurrency Regulation:
Expect continued conversations about cryptocurrency regulation. Lawmakers in Washington D.C. and across the world are trying to figure out how to establish laws and guidelines to make cryptocurrency safer for investors and less appealing to cybercriminals.
“Regulation is probably one of the biggest overhangs in the crypto industry globally,” says Jeffrey Wang, head of the Americas at Amber Group, a Canada-based crypto finance firm. “We would very much welcome clear regulation.”
China announced in 2021 September that all cryptocurrency transactions in the country are illegal, effectively putting the brakes on any crypto-related activities within Chinese borders. In the U.S., things are less clear. Federal Reserve Chair Jerome Powell said recently that he has “no intention” of banning cryptocurrency in the U.S while Security and Exchange Commission Chairman Gary Gensler has consistently commented on both his own agency’s and the Commodity Futures Trading Commission’s role in policing the industry.
Gensler recently went so far as to say investors are “likely to get hurt” if stricter regulation is not introduced. Plus, the IRS has an obvious interest in making sure investors know how to report virtual currency when they file their taxes. Gensler’s and Powell’s comments are consistent with an emerging view among the Biden administration and other U.S. lawmakers that more cryptocurrency regulation is needed.
Like most things with cryptocurrency, regulation comes with hurdles. “There are different agencies that may or may not have jurisdiction to oversee everything,” says Wang. “And it differs state by state.”
Clear regulation would mean the removal of a “significant roadblock for cryptocurrency,” says Wang, since U.S. firms and investors are operating without clear guidelines at the moment.
Bitcoin’s Future Outlook:
Bitcoin is a good indicator of the crypto market in general, because it’s the largest cryptocurrency by market cap and the rest of the market tends to follow its trends.
Bitcoin’s price had a wild ride in 2021, and in November set another new all-time high price when it went over $68,000. This latest record high follows previous high points over $60,000 in April and October, as well as a summer drop to less than $30,000 in July. This volatility is a big part of why experts recommend keeping your crypto investments to less than 5% of your portfolio to begin with.
But how high will Bitcoin go? Plenty of experts say it’s only a matter of when, not if, it Bitcoin hits $100,000. Bitcoin’s past may provide some clues as to what to expect looking forward, according to Kiana Danial, author of “Cryptocurrency Investing for Dummies.”
Danial says there have been plenty of huge spikes followed by pullbacks in Bitcoin’s price since 2011. “What I expect from Bitcoin is volatility short-term and growth long-term.”
Future of cryptocurrency:
We can speculate on what value cryptocurrency may have for investors in the coming months and years (and many will), but the reality is it’s still a new and speculative investment, without much history on which to base predictions. No matter what a given expert thinks or says, no one really knows. That’s why it’s important to only invest what you’re prepared to lose, and stick to more conventional investments for long-term wealth building.
“If you were to wake one morning to find that crypto has been banned by the developed nations and it became worthless, would you be OK?” Frederick Stanield, a CFP with Lifewater Wealth Management in Atlanta, Georgia, told NextAdvisor recently.
Keep your investments small, and never put crypto investments above any other financial goals like saving for retirement and paying off high interest debt.
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