Hey Crypto Traders, Maybe Regulation Isn't Your Enemy

Welcome to Crypto Currently, our three-times-a-week update on digital currencies in Australia and overseas.

Yes, regulation. We'll look at that in a second, but first let's start with our usual update on prices.

So it's been been about 10 days of nothing much in crypto markets and traders are getting restless. Bitcoin still languishes where it started December last year, Ethereum is about where it was at the start of January, and Ripple is worth less than it was on Boxing Day. In the rocket-powered world of crypto trading, it's all beginning to feel a bit dull.

So is it now just a slow trek from the excitement of riches and Wall Street disapproval, all the way back down to the obscurity of the basements and garages from which cryptocurrency emerged? Well probably not. Remember, if you bought Bitcoin on October 8 last year, you’ve collected higher returns than a Commonwealth Bank shareholder has got in the last six years. But despite this, the banking world keeps trying to intervene. This week we had another intervention from a Wall Street heavyweight warning of the “realistic risk of total loss” inherent in cryptocurrencies. Markus Mueller, Chief Investment officer at Deutsche Bank, made the warning in an interview with Bloomberg, saying “more regulation, security, and transparency” is required before crypto attains the status of traditional investments. To crypto traders, these are all dirty words that send markets tanking—and especially the word "regulation."

Now, the widespread distrust of regulation is an interesting one. Because crypto investors seem to unanimously believe governmental intervention will only work against them. But that's not entirely true. There are in fact, many regulations that serve to protect investors.

Take for example "churning," in which traders bid for and sell assets at the same price to push up trading volumes and give the impression of increased market activity, only to cash in when the price rises. In traditional markets churning has been banned for decades, but not so in crypto.

Another con job is the old "pump and dump" where a group of investors conspire to spread fake news that causes prices to rise. As soon as this happens, they dump their holdings onto unsuspecting victims and take a long, ill-gotten holiday. Again, this is highly illegal in a regulated market (it's actually what brought Jordan Belfort aka the Wolf of Wall Street undone) but there's nothing to stop pump and dump schemes in crypto.

So maybe cryptocurrency traders don’t want the man breathing down the neck or printing their Bitcoin into worthlessness, but surely they can see the value in some regulation.

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