Scott Ryan, who is a credit analyst and avid follower of the cryptocurrency markets, believes that crypto markets need a particular regulation. On the one hand, these markets are known for being decentralized which is accepted as a benefit. But on the other hand, such a lack of control may lead to a distortion of reality and spread of fake news, which may either positively or negatively influence the markets on the whole and assist in raising speculation on the crypto market.
”War” in the informational crypto space
Mr. Ryan guesses there are quite complicated problems with how pieces of crypto research and news on the related topics are delivered to the public. To give an example, the author focuses on the market effect of a specific group, which he doesn’t name. In his words, one publication recommended a cryptocurrency ZenCash back in October 2017, and it immediately affected ZenCash rates, which can be proved by a chart below.
“As soon as this publication announced its recommendation of ZenCash, the price skyrocketed from roughly $10 to about $25,” the analyst pointed out in the article for the CoinDesk. “Did something fundamentally change about ZenCash that warranted such a dramatic spike in value? I think not.”
Therefore, it is questionable whether the staff of the publication proceeded to dump their investment on blind followers or not. And it will remain unknown for the rest of the cases unless regulation, disclosure and identity requirements will be set up with time.
“Imagine if it were legal for equity research analysts to short stocks just before publishing a sell recommendation on behalf of a major investment bank, or if financial advisors could purchase a stock just before recommending it to their clients. Now that the aforementioned publication has a cult-like following, there is nothing to stop them from loading up on their "coin of the month" just before the announcement, and regardless of which coin they recommend, the following they've garnered will create a self-fulfilling prophecy,” explained Mr. Ryan.
Hence, according to his opinion, there is a demand for careful and well-versed analysts, whose aim would be to inform the community but not to use informational measures to gain benefits. Only such authors, believes Mr. Ryan, will be able to publish legitimate and unprejudiced pieces of research concerning crypto markets. Despite the idea that decentralized systems will remove lots of centralized institutions, he also believes that it is impossible to conduct unbiased research without the assistance of regulators.
Crypto markets need regulators. But of which kind?
The analyst suggests attaching the identity to bitcoin transactions as it will help to prevent the support of terrorism or money laundering. This way, blockchain may be not only a technological innovation but also a mean of socialization. Another issue is that he emphasizes is that it is better for people on the crypto asset market to regulate themselves before the intervention of regulators.
“In the spirit of decentralization, as a community, let's create our own framework, one that protects investors from thieves and pump-and-dumps, but also shatters the barrier between the rich and poor. We all should have the right to invest how we see fit, but also have the peace of mind knowing that criminals will face consequences,” explains Mr. Ryan, suggesting there should be created a system called happy medium.
In his opinion, this system will battle a traditional one, which for sure is designed for the wealthy to become wealthier.
Ultimately, the analyst points out that no unprejudiced and credible piece of research can be conducted without regulatory institutions, even though there is a threat of liquidity decrease and valuations damage. But if there’s no regulation at all, the whole crypto asset market is at risk of becoming unstable due to dishonesty and pump-and-dump schemes.
Screenshot source: CoinMarketCap