Turning point for the crypto community? Where bitcoin goes from here

It’s been a busy year for the crypto business. After reaching a peak of over $68,000 in November 2021, Bitcoin has collapsed to around $20,000.

But for long-term ETF investors, some experts advise taking crypto’s slide in stride.

“If you’re going to do this right, then what happens in the last nine months is completely irrelevant,” Rick Edelman, founder of Edelman Financial Services, told Bob Pisani on CNBC’s “ETF Edge” on Monday.

“If you’re investing for the next five to 10 years, it’s just a simple breakout in the market and you ignore it,” he added.

But with Bitcoin falling to near two-year lows, short-term temperaments are met with a mix of positive and negative factors that point to where the crypto community will go from here.

“It’s a really dynamic moment in the market,” Matt Hogan, CIO of Bitwise Asset Management, told Pisani on Monday.

Ethereum’s large-scale technical upgrade is a constructive force for the future of the world’s second-largest blockchain, Hougan said. A wave of institutional investors entering the market and an influx of venture capital activity are also forward-looking indicators of crypto’s future.

On the other hand, regulatory pressure from the Federal Reserve and the Securities and Exchange Commission is working against it.

“It creates this volatile market where crypto goes up and down and can’t figure out which way to go,” Hogan said. “And I think we’re probably stuck there, at least through September.”

Edelman explained that in order for institutional investors to engage with Wall Street firms, endowments and pension funds, there must be regulatory and legislative rules.

“The adults in the room recognize that regulation is a good thing,” Edelman said. “Right now we have 1% engaged in crypto. You won’t get the other 99% until they clarify what the traffic rules are.

“We’re seeing new rules coming out of the Treasury Department, the IRS, FINRA and the Fed,” he said. “And by the SEC and the CFTC. We currently have over 50 bills in Congress. And it’s all very healthy.”

SEC Chairman Gary Gensler said the agency should have a major role in crypto enforcement, especially for tokens. In a speech this month, Gensler issued a warning to organizations he believes are violating existing securities laws, asking officials to possibly “fine-tune compliance for crypto security tokens and intermediaries.”

“I think there was a pretty direct threat against the crypto trading venues — large enterprises like Coinbase,” Hugan said. “Apparently they’re on his horizon.”

In July, the crypto firm’s shares tumbled after it was announced that it was facing an SEC investigation into whether the platform was offering unregistered securities.

“I’m happy to say it again and again: We are confident that our rigorous vetting process — a process that the SEC has already reviewed — does not allow securities outside of our platform,” said Coinbase Chief Legal Officer Paul Grewal on Twitter.

Proposals for greater SEC oversight of the crypto community are likely to be met with hostility from the community itself, although the agency has already taken steps to implement its regulatory agenda.

In February, the SEC accused BlockFi Lending of failing to register the offer and sale of its retail crypto lending product. The firm agreed to settle the charges by paying a $50 million penalty and ceasing unregistered offers and sales of the credit product.

“A year from now, the major trading venues will be in the process of registering with the SEC,” Hoogan said. “I think individual tokens, it’s a much longer term.”

While speculative assets have a tough road ahead, Edelman said the number of people who own cryptocurrencies continues to be a steadily growing figure.

“The interesting thing is that despite the fact that [Coinbase is] down 70% from its peak, the number of people who own it remains unchanged,” he said. “Which means those who wanted it aren’t bothered by it.”

Beyond the crypto community, the pace of adoption by major investment firms shows that digital currencies are being embraced by Wall Street, Hogan said.

“The arrival of Blackrock and Schwab reinforces to ordinary investors that bitcoin is not going away,” Hoogan said. “I think that’s already been decided. Now it’s how big that future is.”