Investors globally are apprehensive over the recent rise of the prices of Bitcoin and other cryptocurrencies which saw remarkable surges over the weekend driving the entire crypto market to its all-time high of around $2.5-trillion.
Bitcoin itself is seeing a nearly record breaking surge, climbing to over $60,000 per coin for the first time since May. The all-time record price of Bitcoin is $64,863 – a milestone the digital currency glimpsed in April this year.
This recent surge propelled by renewed interest in crypto stems from a highly-anticipated bitcoin futures exchange-traded fund (ETF), as well as several new bitcoin and crypto offerings being made available by some of Wall Street’s biggest names.
The large cryptocurrencies, including bitcoin and ethereum, are seeing rocketing growths with crypto investors predicting that this “ludicrously strong” rally will continue through the rest of 2021.
Read also Bitcoin Standard is Best Way to Grow Nigeria, Zimbabwe Economies, Says Saylor
As cryptophiles are rejoicing, Forbes reports that an influential central banker currently serving as Bank of England’s deputy governor for financial stability is warning that “a massive collapse in crypto-asset prices [is a] plausible scenario.”
The banker, Jon Cunliffe, is also warning that the pace at which bitcoin and the crypto market is growing could pose a threat to the financial system if not regulated “urgently.”
Cunliffe pointed to the unchained growth of the market, soaring by “roughly 200%, from just under $800-billion to $2.3-trillion” in a matter of hours.
He uses the example of the 2008 global financial crisis to point out that it doesn’t take a wide-ranging change to fuel a market collapse – “As the [2008 global] financial crisis showed us, you don’t have to account for a large proportion of the financial sector to trigger financial stability problems—sub-prime was valued at around $1.2 trillion in 2008.”
Read also Why A Host Of VCs And Founders Poured $1.7m In Nigerian Fintech Startup, Brass
The price of bitcoin and indeed other crypto remain extremely volitile because of the unbacked nature of cryptocurrencies, whose price is dependant simply on how much people are willing to pay at any given time. This causes massive highs and devastating lows. In May, bitcoin reached $60,000 per coin but then the market leapt into a freefall with bitcoin losing almost half of its value in a matter of days.
Cunliffe, who has been monitoring cryptocurrencies over the last several years as an advisor to the G20’s financial stability board and the Geneva-based Bank of International Settlements, has called on regulators to urgently deploy “tough regulations” in order to avoid a market collapse.
“When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice,” Cunliffe said.
“Regulators internationally and in many jurisdictions have begun the work. It needs to be pursued as a matter of urgency.”
Read also Clickatell Announces Chat Commerce Platform with New Payment Capabilities
While some crypto exchanges like Coinbase and Binance have clashed with regulators in the past, others are welcoming more regulations and regulatory clarity in a move they believe will open the sector to more innovation and new funding opportunities.
Cunliffe’s warnings that the massive crypto wave could lead to a future meltdown aren’t in a vaccuum. Earlier this year, Viktor Shvets, MD at Macquarie said on a Bloomberg podcast that the next financial crisis could “originate in the mania for cryptocurrencies”.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry