Systematic Risks Are Going to Build if Bitcoin Does Not Get Regulations – Coinpedia – Fintech & Cryptocurreny News Media

Since Bitcoin has been seeing bearish price movement with low overall volatility, there are no signals of strength or recovery in its price. After a brief rise to the $21K level, the price is gradually falling to retest the demand zone at $18K. Additionally, this zone provides psychological support and coincides with 2017 high.

The founder and CEO of the venture capital firm Social Capital, Chamath Palihapitiya, has warned that there is a significant systemic risk facing Bitcoin that might have long-term consequences. In a recent episode of his All-In podcast, Palihapitiya claimed that the risks are a result of a number of issues affecting the cryptocurrency business, namely the lack of regulations.

Is lack of Regulations an Issue?

If something is not done right away from a regulatory standpoint, he said, the dangers could have a detrimental impact on the future of Bitcoin. According to Palihapitiya, Bitcoin requires a standard set of criteria, such as the capacity to track dangers surrounding the commodity. He said that in order to protect the future of cryptocurrencies, stakeholders must concentrate on this issue.

“The big problem is obviously in the absence of any regulatory oversight, this stuff is going to happen. Systemic risks are gonna build up. That’s what we’re facing right now is an enormous amount of systemic risk, largely around Bitcoin,” he said. 

The billionaire, who is also a proponent of cryptocurrencies, opined that regulation of Bitcoin is absolutely necessary. He suggested that Bitcoin could be considered a security because of the size and volume of the market.

Palihapitiya also dug into further issues plaguing the cryptocurrency industry that can be fixed by laws. He criticized decentralized finance (DeFi), for instance, pointing out that the high staking model introduces substantial risks for ordinary investors and bitcoin exchanges.

Additionally, the venture capitalist warned against the off-chain cryptocurrency activity, pointing out that it might be a backdoor for illicit operations. He thinks that malicious actors might leverage off-chain activity to artificially inflate token prices and harm investors.

“What happens is when these things initially get listed, retail goes crazy, the price goes up. And you know, you spin that loop as fast as you can, and you can extract an enormous amount of money,” he said. 

At the time of writing, BTC is trading at $19,864.