Regulation can be a good thing…. Right about now, every capitalist reading this wants to punch me in the face – before you do, let’s think about what China just did and why we should be thanking them.
As I’m writing this, I’m looking at a sea of red. There is blood in the streets and all of you are thinking the same thing: “I’m going to lose everything”. I’m not going to give you the usual Warren Buffet advice about buying when there is blood in the streets, even though you really should. What I’m attempting to do is provide some perspective.
It’s no secret that there are cyclical movements in the marketplace; they exist in cryptocurrencies as well as traditional stock markets. If you didn’t know this you probably shouldn’t be investing your hard earned money. Here is a quick lesson on these cycles. These movements are based on a number of different events/catalysts, as well as overall sentiment about the sector as a whole. Every new technology has early adopters, those looking to get rich by speculating, and then the masses jumping in once they have learned enough and feel safe using the technology.
We have seen these cycles play out with Bitcoin over the past few years, and every time we hit a “Markdown” phase, we all tend to fear the worst. It’s natural to be protective about your downside, and you should always be considering the possibility, but it is wise to invest in something you are confident in. If you are confident in your investment, these cycles don’t become worrisome – they become road bumps in a long fruitful journey.
The keyword here is confidence. Confidence provides comfort and comfort begets investment. So, why should we be thanking China? Essentially China has stated publicly that they will be regulating ICOs moving forward. They recognize the current reality of scam artists creating a polished brand, website, and grandiose vision backed by nothing more than an ambitious entrepreneur looking to make a quick buck.
In Wall Street, Gordon Gekko famously said “Greed is Good”. Greed is good because it drives growth, it spurs further development, and after enough greed driven growth, it requires regulation. Why does it require regulation? As I mentioned earlier, there are cycles and each cycle is driven by a different group of investors. With respect to cryptocurrencies, we have moved from well informed insiders to early adopters, and now, we are about to enter an era of mass adoption. As an investment opportunity becomes less risky (more regulation), more and more potential buyers are becoming interested. So, what I’m trying to say is, regulation is opening the door for a much, much bigger pool of buyers.
At the end of the day, regulation is good because it drives adoption and adoption drives up prices.
As always, thanks for reading and if you have any questions or comments, please leave them below.