Cryptocurrencies have been around for over a decade, with Bitcoin being the first cryptocurrency launched in 2009. Since then, the industry has grown, with more than 4,000 cryptocurrencies in the market today. And yet, despite its growth, there are concerns that the cryptocurrency industry might be dead in America.
There are a few factors to consider when assessing the state of the cryptocurrency industry in the United States. The first is regulation. In the early days of Bitcoin, it was seen as a wild west, uncontrolled and unregulated. Today, this is no longer the case. Authorities like the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) have stepped in to regulate the industry.
In 2019, the SEC rejected several Bitcoin Exchange Traded Funds (ETFs), citing concerns over market manipulation and custody issues. This was a significant blow to the industry, as many had hoped that ETFs would bring institutional investment and mainstream adoption to cryptocurrencies. The SEC’s decision shows that it is not yet convinced that the cryptocurrency industry is safe and secure enough for mainstream adoption.
If the SEC continues to reject ETFs and other cryptocurrency products, it could have a chilling effect on the industry. Without regulatory approval, it will be difficult for mainstream financial institutions to enter the market, and investors may be wary of investing in a market that is not regulated.
Another reason why the cryptocurrency industry may be dead in America is the lack of adoption. Despite the industry’s growth, cryptocurrencies are still largely a niche market. According to a survey by Finder.com, only 14% of Americans have invested in cryptocurrencies. This is compared to the stock market, where more than half of Americans are invested.
There are several reasons for this lack of adoption. One is that cryptocurrencies are still seen as speculative investments. While Bitcoin’s price has soared over the past decade, it has also experienced significant price volatility. This makes many investors wary of investing in a market that can be so unstable.
Additionally, cryptocurrencies can be difficult to use. Unlike traditional investments, which can be purchased through a brokerage account, cryptocurrencies must be bought through a cryptocurrency exchange. These exchanges can be confusing and intimidating for first-time buyers, leading many people to avoid cryptocurrencies altogether.
The lack of use cases for cryptocurrencies is another reason why adoption has been slow. While some businesses accept cryptocurrency payments, they are still few and far between. Until cryptocurrencies are widely accepted as a form of payment, they will remain largely a speculative investment.
Despite these challenges, there are reasons to believe that the cryptocurrency industry is not dead in America. For one, cryptocurrencies are being used as a hedge against inflation. With the Federal Reserve pumping trillions of dollars into the economy as part of its response to COVID-19, many investors are concerned about the long-term effects of inflation on their portfolios. Cryptocurrencies, particularly Bitcoin, are seen as a hedge against inflation because they cannot be printed or manipulated by governments.
Additionally, the cryptocurrency industry is constantly evolving. New cryptocurrencies are being launched, and existing cryptocurrencies are being improved. For example, Ethereum, the second-largest cryptocurrency by market cap, is undergoing a significant upgrade that will make it faster and more efficient.
There are also signs that adoption is increasing. PayPal recently announced that it will allow its users to buy, hold, and sell cryptocurrencies. This is a significant development, as PayPal has more than 300 million active users. If even a small percentage of those users begin investing in cryptocurrencies, it could lead to a significant increase in adoption.
In conclusion, the state of the cryptocurrency industry in America is unclear. While there are concerns over regulation and adoption, there are also reasons to be optimistic. The industry is constantly evolving, and new developments like PayPal’s announcement show that adoption may be on the horizon. However, until regulatory hurdles are overcome and cryptocurrencies are widely accepted as a form of payment, it’s unlikely that the industry will see mainstream adoption.
Venture capitalist and prominent figure on Crypto Twitter, Chamath Palihapitiya, believes that regulators in the US have severely impacted the country’s crypto economy due to their regulation-by-enforcement approach. Palihapitiya’s comments were made on a recent All-In podcast episode, where he exclaimed, “Crypto is dead in America.” He is not alone in this opinion, with US lawmakers also criticising the approach of the Securities and Exchange Commission (SEC), headed by crypto permabear Gary Gensler. The scrutiny and harsh regulations have caused digital asset firms to move overseas and endanger American competitiveness, according to House Financial Services Committee Chairman Patrick McHenry.
In contrast, policymakers in Europe and the UK are trying to attract the burgeoning industry by introducing new regulatory frameworks. These strategies have been more welcoming of the industry compared to the US regulators’ hawkish approach, particularly against cryptocurrency exchanges that act as fiat-to-crypto on-ramps.
Bitcoin’s price softened by late Monday’s session, ultimately closing 0.3% lower at $27,500 after bulls and bears jostled between $26,900 and $28,000. The Asian trading window opened Monday morning and saw further downside to around $27,350, bringing week-on-week losses on the BTC/USDT pair to nearly 8%. Long-bitcoin futures saw over $50 million in outflows last week, with $22 million of the outflows coming from US investors. Canada led the way with $32 million in outflows.
Despite four months of intense regulatory pressure, BTC remains over 65% higher in the year-to-date, and Ethereum (ETH) remains over 50% higher. Cryptocurrency’s recent rally was seen as a response to turmoil in the traditional financial sector, with investors finding safe-haven assets to protect their money. Therefore, the correction in the safe-haven markets seen lately should not come as a surprise.
On a weekly basis, ETH has underperformed against BTC, having dropped close to 14%. As has been the theme throughout 2023, the blue-chip altcoin space has largely underperformed against the BTC benchmark this week. Polygon (MATIC), Solana (SOL), Cardano (ADA), Dogecoin (DOGE), and Polkadot (DOT) have particularly underperformed, with losses in the high teens. Lower down the value scale, the Bitfinex exchange’s LEO token has added close to 4% in the past seven days, reaching a market capitalisation of $3.3 billion. Ethereum Layer-2 scaling solution Arbitrum (ARB) has borne the brunt of ETH’s short-term correction, remaining the worst performer among the top-100 altcoin set with over 25% in losses in the past seven days.
Overall, the global cryptocurrency market capitalisation fell 0.8% to $1.15 trillion overnight, while the total value locked in the decentralised finance (DeFi) space fell 1.3% to $48.2 billion overnight. It remains to be seen how US regulators’ approach and the industry’s response will affect the market’s future.