The Hidden Worries Behind the Cryptocurrency Market Frenzy: Regulatory Storms and Risks Dance Together

The Hidden Worries Behind the Cryptocurrency Market Frenzy: Regulatory Storms and Risks Dance TogetherRecently, the cryptocurrency market has been red-hot, with Bitcoin prices continuously surging, attracting widespread market attention. However, behind the rising prices, potential risks are equally important to note

The Hidden Worries Behind the Cryptocurrency Market Frenzy: Regulatory Storms and Risks Dance Together

Recently, the cryptocurrency market has been red-hot, with Bitcoin prices continuously surging, attracting widespread market attention. However, behind the rising prices, potential risks are equally important to note.

On October 30th, Bitcoin (BTC) briefly touched $73,660, just 0.4% away from its all-time high of $73,881.3 reached on March 14th of this year. As of press time, BTC was trading at $71,888.2, with a 24-hour gain narrowed to 0.97%. Coinglass data shows that nearly 60,000 people liquidated positions in the past 24 hours, with total liquidations reaching $200 million.

"The recent continuous rise in Bitcoin prices has attracted widespread market attention. However, there are also some potential risks behind the price surge, and investors need to remain vigilant and take appropriate risk mitigation measures," said Wang Peng, an associate researcher at the Beijing Academy of Social Sciences. He believes that the cryptocurrency market is highly volatile, and a price surge does not signify market stability or continued price growth in the future.

Data on Bitcoin spot ETF continuous inflows shows that Bitcoin prices have risen nearly 15% since October. On October 30th, within the cryptocurrency market, almost all of the top 200 altcoins by market capitalization saw gains. The total market capitalization of cryptocurrencies currently stands at approximately $2.4 trillion, with Bitcoin's market share at 59%.

"This round of Bitcoin's rise has been driven by a combination of global economic environment, investor sentiment, and market liquidity," said Wu Gaobin, Executive Secretary General of the World Academy of Sciences and Experts Joint Committee and co-initiator of the Web3.0 Special Committee. He emphasizes that Bitcoin prices are highly volatile, and investors may face significant market risks. Therefore, investors should appropriately diversify their investments, reduce the risk of single-investment exposure, and thoroughly research cryptocurrency market trends, technologies, and regulatory policies.

Bitcoin's price rise is inseparable from the push of related ETFs. In recent days, Bitcoin spot ETFs have attracted significant capital inflows. Data shows that in the last 13 trading days, U.S. Bitcoin spot ETFs recorded a net inflow of $4.73 billion, with related ETF products purchasing an average of $363 million worth of BTC per day. On October 29th, U.S. Bitcoin spot ETFs witnessed a net inflow of $870 million, marking the third highest daily net inflow since the successful launch of such products.

Industry experts generally believe that the core reason for this round of Bitcoin price increase is the significant rise in odds of Trump winning in the election betting market. In response, a seasoned cryptocurrency investor told the China Business Times: "Currently, the call for Trump's victory is extremely high within the crypto sphere. The closer the election, the more exuberant the market sentiment. However, investors should not be swayed by this emotion. While prices might rise, risks are equally significant."

Wealth management firm Mirabaud Group states that if Trump wins the U.S. presidential election on November 5th, cryptocurrencies may benefit from potentially relaxed regulations. However, a more relaxed regulatory approach could attract more investments and innovation into the cryptocurrency sector, leading to concerns about increased fraud risks and insufficient consumer protection.

TyrCapital, a cryptocurrency hedge fund, published a report suggesting that as BTC continues to capture attention, it is absorbing increasingly larger liquidity, potentially curbing altcoins' upward momentum in the coming months. The report predicts BTC could reach $100,000 by the end of this year and $200,000 in 2025. The report also emphasizes that Bitcoin prices won't only go up. Profit-taking could pressure Bitcoin prices in the days following the announcement of the U.S. election results, but buy-the-dip investors should maintain strong support below $60,000.

Research firm 10XResearch predicts that current market trends and upcoming global events could drive Bitcoin's market price to $100,000 in January 2025. 10XResearch also predicts that Trump will win the 2024 U.S. presidential election, potentially impacting the cryptocurrency market positively. They are optimistic about Ethereum's short-term rebound but remain skeptical about its long-term prospects unless any innovations can alter its stagnant trend.

This year, alongside the approval of Bitcoin spot ETFs for listing, Bitcoin prices have surged significantly, with institutional investors continuously adding Bitcoin as an investment target. Among them, Bitcoin "big player" MicroStrategy has achieved nearly $8.4 billion in unrealized gains through investments in Bitcoin. As of September 20th, MicroStrategy holds a total of 252,200 BTC, with an average purchase price of $39,292 per BTC, totaling a cost of $9.91 billion. Japanese investment firm Metaplanet has increased its Bitcoin holdings by over 600 BTC in October alone. As of now, the company holds 1,018.17 BTC, becoming the largest corporate holder of Bitcoin in Asia.

Wang Peng highlights that corporate investments in Bitcoin can potentially bring profit growth and asset diversification, but the volatility and regulatory risk of the cryptocurrency market could negatively impact a company's financial condition and reputation. Therefore, companies need to conduct thorough risk assessments and decision analyses before determining whether to invest in Bitcoin, as well as implement corresponding risk management measures.

Recently, Microsoft, in a filing submitted to the U.S. Securities and Exchange Commission (SEC), stated that the company will vote on "evaluating investments in Bitcoin" at its next shareholder meeting on December 10th. However, the document indicates that the Microsoft board believes management has carefully considered this matter, thus recommending voting against the proposal. Wu Gaobin believes that based on the current market environment and shareholder sentiment, the likelihood of Microsoft passing this proposal is not high. On the one hand, the Bitcoin market is highly volatile, leading to higher investment risks for companies. On the other hand, corporate investments in Bitcoin may face regulatory pressure.

Regulations Have Not Relaxed

Behind the Bitcoin price surge, the cryptocurrency market is far from peaceful. Data shows that since October, the U.S. SEC has filed charges against over 20 crypto projects and individuals, including Cumberland, Gotbit, and CLS, seizing over $25 million in cryptocurrencies. Cryptocurrency market makers and trading institutions have become primary targets for enforcement.

Recently, news surfaced that the U.S. federal government is investigating potential violations of sanctions and anti-money laundering regulations by cryptocurrency company Tether. Although Tether officially denied the news, it still triggered some panic in the market.

According to Coingecko data, as of now, cryptocurrency enforcement settlements by U.S. regulators in 2024 have reached nearly $20 billion, representing a 78.9% increase compared to 2023 and accounting for almost two-thirds of the total settlement amount over the past five years. Additionally, a report released by socialcapital on October 19th shows that the U.S. SEC levied $4.68 billion in fines against the crypto industry in 2024, a 3,000% increase compared to $150 million in 2023.

Wu Gaobin believes that regulation forms the foundation for healthy market development. For the cryptocurrency industry, reasonable regulation helps standardize market order and protect investor interests. It's worth noting that increased regulatory intensity also leads to higher operating costs for businesses.

On October 29th, Consensys, an Ethereum network software provider, announced layoffs affecting 20% of its workforce, or approximately 160 employees. Company founder and CEO Joe Lubin attributed the layoffs to macroeconomic headwinds and the legal expenses incurred from prolonged struggles with regulators. Consensys previously penned an open letter to the future U.S. president urging clear and supportive regulations for cryptocurrencies and Web3. The letter emphasizes the need for transparent regulatory decisions to maintain U.S. competitiveness on a global scale while addressing consumer protection and illegal activities.

In response, Wang Peng points out that as countries tighten regulations on cryptocurrencies, companies will need to allocate more resources to comply with regulatory requirements. At the same time, market competition will intensify, forcing companies to invest further in enhancing their competitiveness. All these factors contribute to increased operational costs for businesses.

Wang Peng underlines that ever-changing regulatory policies on cryptocurrencies across nations could significantly impact Bitcoin prices. Investors need to stay informed about changing regulatory landscapes and adjust their investment strategies accordingly.

"From a global perspective, the regulatory trend in the cryptocurrency market is characterized by strengthening oversight and standardized development," Wang Peng believes. Clear regulatory frameworks will have a profound impact on the development of the cryptocurrency industry. On the one hand, regulatory rules will provide clear compliance requirements and guidance to businesses, helping reduce operating costs and risk levels. On the other hand, regulatory frameworks will promote standardized market development, enhance market transparency and fairness, and create a more stable and secure investment environment for investors.

Editor in charge: Xu Yunxi

Chief Editor: Gong Peijia