Earlier today, Roula Khalaf, Editor at Financial Times, penned an opinion piece that scrutinizes the resilience and future prospects of Bitcoin, particularly in light of regulatory changes and the potential introduction of Bitcoin ETFs. Khalaf begins by noting that despite the downfall of cryptocurrency exchange FTX and the legal troubles of its former CEO Sam Bankman-Fried (aka “SBF”), Bitcoin prices have not suffered. In fact, the cryptocurrency has doubled in value over the past year.
According to Khalaf, this price stability has been attributed to two main factors. First, she says that Bitcoin miners are expected to see their rewards halved in early 2024, leading to a reduced supply and potentially higher prices. Second, she mentions that there is anticipation that the U.S. will introduce regulatory measures that could legitimize digital assets. Specifically, the U.S. Securities and Exchange Commission (SEC) is expected to grant permission to financial giants like BlackRock to launch exchange-traded funds (ETFs) that invest directly in Bitcoin.
However, Khalaf challenges these assumptions. She argues that even if the SEC approves Bitcoin ETFs, this won’t necessarily mitigate the risks associated with the cryptocurrency, such as scams and volatility. She cites the example of ProShares, which launched the first Bitcoin ETF in late 2021. While the ETF initially boosted Bitcoin prices and closed its first trading day at nearly $42, it now trades at $17.50.
Khalaf also points to the decline in the global cryptocurrency market cap, which has fallen from $3 trillion to about $1.3 trillion. She mentions that Elon Musk, a vocal supporter of digital assets, has refrained from further exposing Tesla to Bitcoin’s price volatility and that Tesla’s initial investment of $1.5 billion in Bitcoin in early 2021 has dwindled to just $184 million in digital assets.
Lastly, Khalaf highlights the liquidity issue, stating that remaining cryptocurrency platforms are facing regulatory pressures. She notes that trading volumes at Coinbase, the largest U.S. digital asset platform, have decreased by 55% in the first half of the year. Without a fresh influx of capital, Khalaf believes that the current price rally of Bitcoin is not sustainable.