According to the Bank for International Settlements (BIS), retail investors are the main driving force behind the recent rally in Bitcoin’s price. The BIS noted that retail investors tend to jump on Bitcoin anytime the price shows signs of a bullish run, in hope for a higher return.
At the time of writing, Bitcoin is trading at $24,420 after dropping to a low of $23,500 on Wednesday. The cryptocurrency has seen significant volatility since the beginning of 2023, moving from a low of $16,000 to above $25,000. However, it has failed to turn the $25,000 resistance into support.
Despite the recent surge in Bitcoin’s price, the BIS believes that cryptocurrencies have lost the battle against national currencies such as the euro, pound, and yen. The BIS’s general manager, Agustin Carstens, expressed skepticism about cryptocurrencies and their ability to replace fiat currency.
Carstens stated that technology alone does not make for “trusted money” and that there is a greater need for hastening regulations in the industry. He also noted that the most critical aspect of regulating cryptocurrencies is ensuring that their activities do not impact the financial system.
The recent events in the crypto sector, such as the collapse of FTX, have raised serious concerns about stablecoins’ ability to function as money.
Stablecoins rely on the credibility of fiat with fewer regulatory protections, which means they cannot ensure the unity of money.
Carstens expects a “strong statement from the Group of 20” countries to lead the push to strengthen regulation of the digital asset sector.
He believes that if events such as the FTX collapse happen again, they could translate into a systemic collapse.