Officials are paying more attention to cryptocurrencies, and so far investors don’t seem to mind.
Bitcoin futures (@XBT on TradeStation) have advanced 7 percent in the last week, while Litecoin (LTCUSD) is up 4 percent. That compares with pretty much flat performances for major equity indexes like the S&P 500 and Dow Jones Industrial Average over the same period.
The crypto rally took place as G20 finance ministers took a laissez-faire approach to the emerging asset class at a meeting in Buenos Aires. The main takeaway was that governments want to regulate the market to prevent criminal use rather than banning them outright. Secondly, the U.S. Securities and Exchange Commission is starting to view coins as securities that need to be registered like stocks. These are known as ICOs, or “Initial Coin Offerings.”
“This may favor core franchises like Bitcoin versus obscure new ones,” said James Putra, TradeStation Technologies’ in-house crypto expert. He added that increased oversight will reduce the influx of new tokens into the market and could “drive capital to bigger names.”
Putra sees other positives in the market. One is the potential for more buying after Americans receive income-tax refunds next month. He also said that the ongoing liquidation of defunct exchange Mt. Gox has increased the amount of Bitcoin in circulation. That, in turn, has depressed the price. Longer-term, Putra sees the potential for a rebound as the process concludes.
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