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Can regulation save crypto against future market dip?


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On every front, the virtual assets industry has suffered a major setback in 2022. The general performance of the industry falls below the expectation of investors and experts who had predicted a prosperous year for cryptocurrency. With the prevailing crisis, stakeholders in the crypto industry are calling for proper and clear-cut crypto regulation.

With the great boom of 2021, many hoped that the crypto industry would take more steps further. Many expected more price boom, the influx of investment, proper regulation, mass adoption of cryptocurrency and massive growth at large. However, the reverse has been the case as the industry has endured one of the most turbulent years since its inception.

The critics are right?

Within the year, the industry struggled to attain general price stability as it faced numerous shortcomings. Hacks upon hacks, the collapse of Terra and FTX all contributed to the setback. The crypto industry faced questions from critics who believes the sector is an arena of illicit activities. This belief overshadowed their approach to the industry, thus, making them focus more on holding it’s growth at bay. Nonetheless, the argument still contain some pieces of truth even if they were bore out of an opposing stand.

More so, these critics highlighted numerous reason why the industry must be regulated to protect it against dens of dubious fellows. Meanwhile, the collapse of FTX and Terra justified their concerns and argument against the industry. From a balanced view, most regulators are concerned about the use of crypto for fraudulent activities.

Activities that can either hurt investors or threaten the security of their respective jurisdiction. Regarding customer safety, there are increasing calls for the proper regulation of the industry. Some regulators believe that to some extent, regulation can protect the crypto against further dips or market crises.

Can regulation save crypto against future dip?

To a reasonable extent, it’s feasible that a proper regulation of the industry will save it against future dips. Most of the casualties cryptocurrency firms suffered during the present crypto bear market emanated due to the collapse of some top projects. In a recent report by Chainalysis, the collapse of Terra cost crypto firms about $20 billion. Also, the report indicated how the recent crisis of FTX cost the crypto space about $9 billion.

Logically, the collapse of these top projects affected numerous firms, costing investors fortunes. Their demise diminished the growth of the crypto industry crumbling it almost to its knees. Also, in a recent report by Reuters, Binance is a subject of a criminal investigation by the U.S Department of Justice. According to the report, the cryptocurrency exchange is facing charges on money laundering, therefore, sparking fear among investors.

At this stage, the crypto space can’t afford to see Binance go through a crisis of any type. It’s certain that any stain on the cryptocurrency exchange will bring the sector to it’s knees with few projects like Bitcoin and Ethereum standing out.

Now, the crypto space is currently at a crucial point where it needs proper regulation as a saving grace. A well-regulated market where regulators have a clear definition of their duties would have averted the whole FTX and Terra crisis. To some extent, the introduction of a good regulatory framework will only protect users and let the industry grow. Regulators could have spotted the irregularities in FTX and Terra’s business activities before their eventual collapse.

The crypto industry will recover and regulations will be it’s mastermind

While lack of a clear-cut regulation could have been a major factor in the current price downturn in the crypto space, the presence of regulation can also revive it. With proper regulation, crypto investors will enjoy legitimate protection against fraudulent projects. The presence of regulation will give more assurance to investors that their crypto assets are safe. With that, the sector will witness more influx of funds from investors, aiding the industry to get back to its feet.

Though, there are arguments that the prevalent inflation contributed to the price dip of crypto assets. However, it’s obvious that the impact of inflation of the stability of the the industry has been minimal. Despite the recent hawkish approach of Central banks that have seen them increase their rates in a bid to battle inflation, Bitcoin continued to grow. Returning on a part to recover the losses inflicted by the crypto winter. However, both BTC and Ethereum responded negatively to the recent 50bps increase in Fed’s rate. Yet on the long run, the two assets outperformed Gold and Stock.

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Olaleye Komolafe
Olaleye Komolafe
Olaleye is a professional reporter with vast experience in web3, cryptocurrencies, and NFT journalism. He enjoys writing about the evolving metaverse sphere and the prevalence in the crypto sphere. Notably, some of his contents have been published in numerous international publications. Away from the crypto world, Olaleye is a political scientist and a lover of football

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