Is it safe to invest in Crypto Currency? How safe is to invest in Crypto Currency?

We’ve seen Bitcoin hit multiple new all-time high prices — followed by big drops — and more institutional buy-in from major companies. Ethereum, the second-biggest cryptocurrency, notched its own new all-time high recently as well. U.S. government officials and the Biden administration have increasingly expressed interest in new regulations for cryptocurrency.

All the while, people’s interest in crypto has skyrocketed: it’s a hot topic not only among investors but in popular culture too, thanks to everyone from long-standing investors like Elon Musk to that kid from your high school on Facebook. 

In many ways, 2021 was a “breakthrough,” says Dave Abner, head of global development at Gemini, a popular cryptocurrency exchange. “There’s tremendous focus and attention being paid to [the crypto industry].”

But the industry is only in its infancy and constantly evolving. That’s a big part of why every new Bitcoin high can be easily followed by big drops. It’s difficult to predict where things are headed long-term, but in the coming months, experts are following themes from regulation to institutional adoption of crypto payments to try and get a better sense of the market. 

While exact predictions are impossible, we asked five experts about what they’re paying attention to in the crypto space for the future:

Cryptocurrency Regulation

Expect continued conversations about cryptocurrency regulation. Lawmakers in Washington D.C. and across the world are trying to figure out how to establish laws and guidelines to make cryptocurrency safer for investors and less appealing to cybercriminals. 

“Regulation is probably one of the biggest overhangs in the crypto industry globally,” says Jeffrey Wang, head of the Americas at Amber Group, a Canada-based crypto finance firm. “We would very much welcome clear regulation.”

China announced in September that all cryptocurrency transactions in the country are illegal, effectively putting the brakes on any crypto-related activities within Chinese borders. In the U.S., things are less clear. Federal Reserve Chair Jerome Powell said recently that he has “no intention” of banning cryptocurrency in the U.S while Security and Exchange Commission Chairman Gary Gensler has consistently commented on both his own agency’s and the Commodity Futures Trading Commission’s role in policing the industry.  

Gensler recently went so far as to say investors are “likely to get hurt” if stricter regulation is not introduced. Plus, the IRS has an obvious interest in making sure investors know how to report virtual currency when they file their taxes. Gensler’s and Powell’s comments are consistent with an emerging view among the Biden administration and other U.S. lawmakers that more cryptocurrency regulation is needed.

Like most things with cryptocurrency, regulation comes with hurdles. “There are different agencies that may or may not have jurisdiction to oversee everything,” says Wang. “And it differs state by state.”

Clear regulation would mean the removal of a “significant roadblock for cryptocurrency,” says Wang, since U.S. firms and investors are operating without clear guidelines at the moment.

What new regulation could mean for investors

The $1.2 trillion bipartisan infrastructure bill signed by the president in November includes crypto tax reporting provisions that could make it easier for the IRS to track crypto activity among Americans. Even before the new legislation, that’s why experts say investors should keep records of any capital gains or losses on their crypto assets. The new rules may also make it easier for investors to properly report crypto transactions. 

“Exchanges will have to issue 1099-B tax forms with cost basis information to investors,” Shehan Chandrasekera, CPA, head of tax strategy at CoinTracker.io, a crypto tax software company, recently told NextAdvisor. “This will significantly reduce the crypto tax filing burden.” 

Regulatory announcements can also affect the price of cryptocurrency in already volatile markets. Market volatility is why investing experts recommend keeping any cryptocurrency investments to less than 5% of your total portfolio and never invest anything you’re not OK with losing. 

Ultimately, many experts believe regulation is a good thing for the industry. “Sensible regulation is a win for everyone,” says Ben Weiss, CEO and cofounder of CoinFlip, a cryptocurrency buying platform and crypto ATM network. “It gives people more confidence in crypto, but I think it’s something we have to take our time on and we have to get it right.”

Source : Time.com