Nervous Investors Not Trading in Rising Bitcoin

Bitcoin has been on a remarkable run lately, hitting a new all-time high of over $67,000 and gaining more than 160% in the past year. Some analysts have attributed this surge to growing institutional adoption, innovation in the crypto space, and favourable macroeconomic conditions. However, not everyone is convinced that this is the right time to jump on the crypto bandwagon. In fact, trading volumes have been declining since the peak of 2017, indicating a lack of enthusiasm among investors. What is holding them back?

One of the main reasons is the persistent volatility and uncertainty in the crypto market, which has been plagued by scandals and controversies. Over the last two years we have witnessed several incidents that have shaken the confidence of crypto enthusiasts and observers alike. For instance, Terra (LUNA), a stablecoin project that was touted as one of the most promising in the industry, suffered a massive crash, losing more than 80% of its value in a matter of hours. The cause was a technical glitch that affected its Oracle system, which provides price data for its algorithmic peg. The incident exposed the fragility and complexity of the crypto ecosystem and raised questions about its reliability and security.

Another example is the bankruptcy of the FTX exchange, one of the largest and most popular platforms for crypto trading and derivatives. The exchange filed for Chapter 11 protection after facing a series of lawsuits and regulatory actions from various jurisdictions. The exchange was accused of facilitating illegal and fraudulent activities, such as market manipulation, money laundering, and insider trading. The collapse of FTX sent shockwaves across the crypto community, as it revealed the vulnerability and lack of oversight of the crypto industry.

Perhaps the most notorious case is that of Binance, the world’s largest crypto exchange by volume and market share. Binance has been under intense scrutiny from regulators around the world, which have accused it of operating without proper licences, violating anti-money laundering rules, and evading taxes. It recently agreed to pay $1 billion to settle a lawsuit from the US Department of Justice and the Securities and Exchange Commission, which alleged that Binance had enabled illicit transactions worth billions of dollars. The settlement was seen as a major blow to Binance’s reputation and credibility, and a sign of the growing regulatory pressure on the crypto sector.

These events have undoubtedly cast a shadow over the crypto market, and have deterred many potential investors from entering or re-entering it. Caroline Bowler, the CEO of BTC Markets, an Australian crypto exchange, said that many investors are still nervous about investing in crypto, despite its impressive performance. She cited macroeconomic uncertainty and regulatory scrutiny as some of the factors that are dampening the demand for crypto. She also said that many investors are waiting for more clarity and guidance from authorities before making their move.

Shane Oliver, an economist and head of investment strategy at AMP Capital, echoed this sentiment, and warned against viewing crypto as ‘easy money’. He said that crypto is still a very risky and speculative asset class and that investors should be careful not to get carried away by hype and emotion. He advised investors to do their homework and understand what they are investing in before taking the plunge. He also said that investors should diversify their portfolios and not put all their eggs in one basket. He acknowledged that crypto has long-term potential, but cautioned against underestimating its complexity and challenges.

Bitcoin may be soaring to new heights, but it is still not a safe bet for everyone. The crypto market is still fraught with volatility, uncertainty, and controversy, which can erode investor confidence and trust. While some may see this as an opportunity to buy low and sell high, others may prefer to stay on the sidelines until the dust settles. Either way, investors should be aware of the risks and rewards involved in crypto investing, and make informed decisions based on their own goals and risk appetite.