Cryptoverse: Bitcoin's scared of commitment, Mr Biden
(Reuters) - Bitcoin loves flirting with the mainstream. But now, as the U.S. president says he wants to get serious, it may be getting cold crypto feet.
When Joe Biden ordered officials to prepare reports on the role of cryptocurrencies in future finance last Wednesday, bitcoin leapt as much as 9% and ether 8%, as many crypto fans hailed a potential milestone in mainstream acceptance.
"The real importance of it is that the president of the United States is talking about crypto," said Jack McDonald, CEO of Standard Custody, a firm handling digital asset custody solutions for institutional investors.
While bitcoin danced above $42,500 following the news, it has since given up those gains and is now back at around $38,000. Similarly ether has slunk back down to straddle $2,500.
That seems a muted market reaction to the White House's first formal pronouncement on crypto - though who can truly understand bitcoin, still licking its wounds from China's rejection and nursing nagging disquiet it's losing its identity.
Some industry watchers see bullish signs for bitcoin, saying the presidential announcement could presage U.S. regulations on crypto that will draw far more institutional money from the likes of pension funds and insurance firms.
"Biden's executive order could signal the end to the wild west of crypto as we know it," said Edmund Kulakowski, senior financial crime consultant at London-based regulatory software company Fenergo.
"Quant-driven hedge funds running arbitrage and quant strategies typically shine in more volatile and unstructured markets," said Ganesh Iyer, chief marketing and strategy officer at New York-based technology company IPC.
"Only time will tell how and when this market will mature. Until that point there is an opportunity now for hedge funds to utilize ultra-low latency networks to make the most of volatile, compliance-light and liquid crypto markets."
There's also little certainty over America's regulatory intentions, with Biden having given federal agencies six months to produce guidance on how best to proceed.
For one thing, it's not clear who's going to be the crypto sheriff, or for that matter whether crypto should be treated as a security or commodity.
Both the Securities and Exchange Commission (SEC), which oversees listed stocks and therefore tokens that are deemed to be securities, and the Commodity Futures Trading Commission (CFTC) which has oversight of commodity and derivatives markets, are among those required to give their input into the reports.
"Specifics related to the SEC, CFTC and other financial regulators are light," said Jerald David, president of Arca Labs, the innovation arm of Los Angeles-based digital asset manager Arca.