What is driving the Bitcoin price upward? The US SEC Chairman Jay Clayton thinks it is the legacy payment systems’ inefficiencies.
The top securities regulator, who confirmed Monday that he is stepping down from his position by year-end, was candid about Bitcoin as he spoke with CNBC on Tuesday. He noted that the cryptocurrency’s ecosystem inflated so far because existing payment mechanisms failed to compete with it.
Bitcoin A Store of Value
Mr. Clayton’s statements came as a part of a response explaining why the SEC, under his tenure, did not regulate Bitcoin. The chairman stated that his office considered Bitcoin as a store-of-value asset because people were using it to purchase illegal securities during the 2017’s initial coin offering boom.
“We determined that bitcoin was not a security, it was much more a payment mechanism and stored value,” he said.
Mr. Clayton added that he sees Bitcoin’s market capitalization ballooning as long as legacy systems remain regressive. Nevertheless, a more-expensive cryptocurrency ecosystem would certainly invite regulations from authorities.
“I think we’re going to see this mature and I think we’re going to see more regulation around the payments space,” he added.
Bitcoin rallied by more than 170 percent this year as investors poured their capital into its market, believing that it would behave as a hedge against potential currency depreciation.
Having crashed to $3,858 in mid-March, BTC/USD logged a 350 percent-plus bull run later in the period that also saw the Federal Reserve’s committing to ultra-low interest rates and indefinite bond-buying.
As of November 18, the pair was trading at $18,488, just more than a thousand dollars shy of hitting an all-time high.
The Jay Clayton regime infamously rejected incoming Bitcoin exchange-traded fund applications one after another, believing that the cryptocurrency was too volatile to back a derivatives product.
Meanwhile, the SEC chairman’s counterpart in the Commodity and Futures Trading Commission (CFTC) granted bitcoin-enabled futures and options. That allowed institutional investors to gain exposure in the cryptocurrency via regulated platforms backed by the Cboe, the CME, and the ICE.
Just yesterday, the Bitcoin options market’s open interest reached an all-time high, with non-US platform Deribit holding 3.4 Billion USD. It is around 80 percent of the total market.
The figures illustrated that Bitcoin is rising more like a gold-like speculative asset that the US dollar. Investors increased their bullish positions for its derivatives, anticipating that its spot-based demand would keep rising against the fears of long-term inflation.