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Why bitcoin is climbing higher despite crackdown

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  • Lisa Ellis, MoffettNathanson Partner, joined Yahoo Finance to discuss Binance, the world’s largest cryptocurrency exchange, getting banned by a UK regulator.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: Investors keeping a close eye on Bitcoin and the crypto markets today. Two big headlines for you, a crackdown in the UK, UK regulators pushing for the ban of Binance, the world's largest cryptocurrency exchange. And then also here in the US, Fed Vice Chair Randal Quarles kind of pouring cold water, saying that he was skeptical about the need for a US digital dollar.

So we want to talk about what this means for Bitcoin and cryptocurrency really at large with Lisa Ellis. She is a partner at MoffettNathanson. And Lisa, let's just start with, I guess, the reaction in Bitcoin today because we just had the chart up on the screen. We still see Bitcoin moving to the upside, up another 5%. You would think news like this would weigh on the price of Bitcoin. What's going on here?

LISA ELLIS: Yeah. It's because broader regulation of the crypto markets, while it may cause some temporary disruption, like when a huge exchange like Binance gets kicked out of the UK, it's, broadly speaking, viewed as a positive for the adoption of cryptocurrencies more broadly. So for example, crypto ETFs, something that, in the US, we've been eagerly awaiting the approval of crypto ETFs. One of the big things holding up the approval of something like crypto ETFs is the fact that the SEC has been uncomfortable with the regulation in these markets around the world.

So a big regulator, like in the UK, taking a stance, even though it could have some initial disruption, is viewed as a step forward in the maturation of this space, which is needed, really, for it to continue to grow.

BRIAN CHEUNG: Lisa, Brian Cheung here. I want to ask though about whether or not a lot of these regulatory headwinds are going to get resolved quickly because on one hand, yes, it's indeed, I guess, a good thing that you have a little bit more regulatory clarity and attention. But at the same time, you have regulators here in the United States kind of scrambling, pointing fingers, saying, who's even responsible for regulating all of this? Which implies to me at least that it's going to be more than just a few years for everything to work itself out. So is that volatility something we should be bracing for and buckling up for for the next five to six years?

LISA ELLIS: It is, yes. I mean, we have to keep in mind that this is still such a nascent technology, barely 13 years old now at this point, something very disruptive and very new. But we've come a long way. We still have a long way to go. And every time a major regulator takes a stance, it at least helps eliminate some of the uncertainty in the market, right? Otherwise, you're sitting there. No one's sure how cryptocurrencies will be regulated in these major markets.

And so just having decisions made-- you know what I mean-- helps eliminate some of that uncertainty and sort of moves the ball forward. But no question, it will continue to take years and years for the regulators to fully resolve whether they're going to treat digital assets as a new type of asset or whether they will sort of fit them into the definitions of a commodity or a security or a currency or something that's already got a regulatory framework around it. Many governments are still trying to figure out the answer to that question.

So yeah, it's still early. I mean, we still have a long way to go. But yeah, a lot of positive movement. Inactivity or the regulators essentially ignoring cryptocurrencies is a bad thing because then, at least at this level, they're rising to the level of visibility that the regulators feel like they need to make decisions and actively focus in the space.

SEANA SMITH: So Lisa, at least in the short term, where do you see Bitcoin heading? Do you think we're still going to be bouncing around these high 30,000 levels, right around 40,000? Or do you think we could actually see a potential catalyst here to get us back to those all-time highs that we were at not too long ago?

LISA ELLIS: [CHUCKLES] Yeah, I wish I had a crystal ball on that, just like everybody else. But I mean, look, the best historical-- this is all new. But the last time, the last cycle, as everyone goes back and looks at these last couple of cycles with crypto assets, when we've come off the highs, it has taken months. It was a period of months where you saw crypto assets bounce around, kind of up and down, volatile, but bounce around. So we're still early in that.

I mean, my best guess would be we've got months ahead of us where we're unlikely-- it feels like there's a lot of support in the $30,000 level for Bitcoin, as we've seen. And so this may be the stable point. But historically, once we've kind of dipped and gotten to a stable point, it's taken months and months and months while the market kind of regroups. And then it kind of goes to the next big leg of growth.

I mean, last time around, it was actually a full year of that. I don't know that we'll expect a year this time. But I would guess it will likely-- we're still early. It's literally just been a couple of months since it came off the highs.

SEANA SMITH: All right, Lisa Ellis, MoffettNathanson, a partner there. Thanks so much for taking the time to join us today.