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Can Regulation Provide Stability Through 'Cryptocurrency Winter'?

By Sean J. Coughlin and Vivian B. Isaboke
October 01, 2022

Cryptocurrency markets experienced significant losses during the first half of 2022 as the market's capitalization declined from $2.9 trillion at the end of 2021 to less than $900 billion at the beginning of June 2022. The most popular cryptocurrency, Bitcoin, was trading at about $21,493, down 54% from the start of the year. Ethereum, the second-biggest crypto by market cap, was down about 56% year-to-date, trading at $1,651.

While crypto has maintained its popularity and interest during the past few months, its value has moved in lockstep with the stock market. In March 2022, Bitcoin and the S&P 500 reached a high of 17 months, indicating that the two markets are moving in similar directions. For the crypto market, in particular, a number of factors ranging from crypto crimes and inflation to layoffs and an ongoing liquidity crisis, have plagued the industry, leading to the current cryptocurrency market crash and creating a "cryptocurrency winter."

Thus, it comes as no surprise as we enter the second half of the year that the crypto winter has reinforced the perception of critics that digital currencies are "risky, flawed and unproven digital financial instruments." Consequently, investors and financial advisers have found themselves seeking stability through regulatory avenues to provide them with a level of transparency, protection and security.

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