What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact way in retrospect in our weekly review.
Over the past two weeks, the crypto markets have been hit by an impressive sell-off wave. Within a few days, most cryptocurrencies plummeted more than 50%. Prices have since recovered a bit, however, crypto assets are still well off their highs. Although increased volatility has historically always accompanied these markets, it particularly catched investors who use leverage on the wrong foot. The depth of the correction is already prompting some voices to proclaim the "end of the bull market." In such phases, it makes sense to maintain focus on fundamental factors. Adoption of cryptocurrencies is in its early stages along with impressive growth rates. Increased volatility is the price an investor has to pay to participate in the exponential opportunity.
With the broader adoption of cryptocurrencies, it is unavoidable for financial institutions to address the new asset class. Over the past few months, there have been well-known banks publishing reports on digital currencies. Partly due to increasing customer demand, some banks felt pressured to give an opinion. Goldman Sachs has also been dealing with cryptocurrencies for quite some time. According to the major U.S. bank, Bitcoin is considered an investable asset that has its own risk profile and is currently going through an adoption phase. In client meetings, the main discussion revolves around the function of the asset class in a portfoliocontext and its various entry points. While Goldman acknowledges the role of the new asset class, its Digital Assets division sees the risks in the area of regulation. Due to inconsistent guidelines around the globe, investments are still not easy to plan.
The rapid surge of digital asset prices spurred the creation of new crypto-focused hedge funds. This is the conclusion reached by PricewaterhouseCoopers (PwC) in its latest survey. According to the consulting firm, an increasing number of established traditional hedge funds are as well experimenting with the new asset class. Just under one-fifth of the funds surveyed have already made investments, and another quarter is interested in digital assets. The remaining share of respondents remain restricted from accessing cryptocurrencies due to regulations and investment mandate guidelines.
In the United States, the regulation of digital assets has seen a number of changes. Different authorities have already given cryptocurrencies a green light or issued guidelines at the very least. Currently, regulators are aiming for a unified crypto framework. The White House is working with officials at the U.S. Treasury Department to examine the major issues surrounding cryptocurrencies. Potential regulatory gaps shall be identified and filled. In addition to cryptocurrencies, the implications of a central bank digital currency (CBDC) are also being explored.
In addition: US billionaire investor Carl Icahn was asked again about his opinion on cryptocurrencies. Like other former Bitcoin skeptics, Icahn has changed his view towards the digital currency. Meanwhile, the investor acknowledges Bitcoin's properties as a hedge against inflation and is planning a potential $1 billion investment. Icahn is also convinced that digital currencies will play a big role in the future and are here to stay. The argument that cryptocurrencies have no intrinsic value strikes Icahn as a weak criticism with regard to the US dollar.
Selected articles in the weekly review:
A recap of the recent price plunge and an analysis of the status of digital assets.
The investment bank is registering increasing demand from institutional clients for the new asset class.
Hedge funds get more involved in crypto markets.
Regulators in the United States are increasingly addressing digital assets.
The well-known Wall Street investor and billionaire has changed his mind about Bitcoin & Co.
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