Crypto Is More Attractive As SEC Gets Aggressive, Investors Say

A crackdown by the US Securities and Exchange Commission and other watchdogs that have been investigating crypto’s worst companies is proving a boon for the industry, with market participants saying they are more likely to invest in the space after greater enforcement action.

Nearly 60% of the 564 respondents to the latest MLIV Pulse survey indicated they viewed the recent spate of legal action in crypto as a positive sign for the asset class, whose trademark volatility has all but disappeared in recent months. Major interventions include the US regulatory investigations into bankrupt crypto firms Three Arrows Capital and Celsius Network, as well as an SEC probe into Yuga Labs, the creators of the Bored Ape collection of non-fungible tokens, or NFTs.

“I’m in the ‘yes’ camp. As a professional investor, you need a regulated investment opportunity, and that opens the door for more professional investors to get involved in crypto, if it’s more regulated, says Chris Gaffney, president of global markets at TIAA Bank. “The more they can get crypto out of the wild west and into traditional investing, the better it will be.”

The sentiment extends to Bitcoin. Most investors were slightly more optimistic about crypto than they were when asked in July. Almost half of those polled expect the world’s largest cryptocurrency by market capitalization to continue trading between $17,600 and $25,000 until the end of this year – a departure from this summer’s sour outlook, when most said it was more likely to fall to $10,000 first rather than climbing to $30,000. To be fair, respondents this time had a wider menu of options to choose from than was available in the previous survey.

“Our investors recognized and the market recognized that the decentralized protocols have unique advantages that can benefit not only crypto markets, but also traditional markets more broadly,” said Mary-Catherine Lader, Uniswap Labs COO, in a Bloomberg TV interview.

While Bitcoin has fallen around 60% this year, its price has been stuck between $18,171 and $25,203 since the last survey, unable to meaningfully break out of this band. Volatility has also largely subsided, with the T3 Bitcoin Volatility Index down 33% since the token hit its all-time high of nearly $69,000 on November 10. Bitcoin traded above 19,400 on Monday at 8:00 a.m. New York time.

Bitcoin has had a strong correlation to risk-on assets as well as the S&P 500 since March, barely changing its position over the past three months as investors tarred the crypto with the same brush as everything else in a rising interest rate environment. Some 42% of respondents said they believe crypto’s correlation to tech stocks will remain the same over the next 12 months, while only 43% said they would increase their exposure to digital assets over the same period.

It has been a tale of two halves for crypto in 2022, with the first half of this year dominated by chaos. There were bankruptcies, like Voyager Digital Ltd.’s, and $40 billion wiped out of the Terra blockchain ecosystem. About $2 trillion in total value was erased from the industry’s record as of the end of 2021. In June, things began to change with crypto beginning to plateau to its current range-bound level as the broader macroeconomic environment deteriorated and traders turned to more traditional assets such as bonds and currency for profit.

The lower volatility is “probable given the indecision out there,” said Katie Stockton, managing partner at Fairlead Strategies.

In September, the Ethereum network completed a major network upgrade known as Merge, which by one estimate will reduce the blockchain’s energy consumption by about 99%. Still, only about a third of investors said they believe the so-called Flippening, in which Ether’s market value eclipses that of Bitcoin, could happen in the next two years — a number largely stagnant from July.