America’s Crypto Crown at Stake: Is the U.S. Losing its Grip?
ARK Invest, in their weekly dispatch to clients, is casting doubt on the U.S.’s ability to maintain its prime position within the crypto industry. The chief concerns listed are the total ambiguity over the regulation of digital assets, coupled with declining liquidity.
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Over recent months, there's been an escalating level of criticism aimed at the U.S. for not providing clear guidelines for crypto businesses. Bold statements in defense of digital assets have been put forth by well-known investors such as Mark Cuban and Mike Dudas, while Ark Invest, under the stewardship of Bitcoin maximalist Cathie Wood, has been making consistent efforts to shift the stance of regulators.
Ark Invest analysts outline two critical problems facing the U.S. market:
1. Regulatory uncertainty
Cryptocurrency exists in a legal gray area, as the main regulatory body, the Securities and Exchange Commission (SEC), is busy trying to keep tabs on crypto startups while leaving the adaptation of laws by the wayside. This approach not only obstructs existing businesses from conducting their operations but also discourages new developers from launching fresh projects.
Several U.S. companies (including Coinbase, Ripple, and Kraken) are persisting in their quest to create a transparent legal environment. Still, there's no telling whether they have the stamina or the resources for this fight. Therefore, it's not out of the question that they may eventually leave the U.S. market and relocate to more accommodating countries (like the UAE, Hong Kong, or Japan) that are working towards setting up clear and straightforward regulations.
2. Liquidity drain
This issue is largely a ripple effect from the first problem, as the uncertainties are not only plaguing regular businesses but also institutional investors, who find themselves compelled to pull out of the crypto market. For instance, Jane Street Group and Jump Trading, prominent market makers with massive capital, had previously been instrumental in shaping the market and endorsing its reputation.
Comparing to a year ago, it’s a very different market now. Market maturity is very much influenced by market liquidity, by diversity of offerings, by diversity of service providers – and, on all of those fronts, the crypto market has taken a few steps back
© Noelle Acheson, a former market analysis executive at Genesis Global Trading
As per data from Coin Metrics, the withdrawal of the above-mentioned institutional players has significantly impacted liquidity, causing the daily trading volume of Bitcoin to plummet by several billion dollars. Although this has led to the market becoming more decentralized in terms of capital, it also represents a significant decline, with doubts over whether other players will step up to fill this void.
In conclusion, without assertive initiatives from the US government to dispel regulatory ambiguities and recuperate liquidity, the US is unlikely to preserve its dominance in the crypto industry. Should this occur, the nation stands to lose a hefty volume of investments and innovations, thereby diminishing its clout in the future global arena.
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