Legendary hedge fund manager and cryptocurrency bull Mike Novogratz is concerned that the surging bitcoin price could cause nervous regulators to attempt to cool down the markets by imposing regulations on cryptocurrency usage.
Novogratz, a former Fortress principal who is currently preparing to launch a $500 million crypto-asset hedge fund, stated on CNBC’s “Power Lunch” that he is not concerned by the price itself — he has predicted that bitcoin could “easily” reach $40,000 by the end of 2018 — but rather that the rapidity of its climb will encourage regulators to take a more active role in overseeing the markets, perhaps by placing new rules on cryptocurrency usage.
“One of the big risks out there right now is that prices are moving so fast that regulators are going to get nervous,” he said. “I could legitimately see bitcoin go $13,000, $14,000, $20,000, $25,000 and see somebody balk.”
Until now, he said, regulators in most parts of the world have been relatively accommodating of bitcoin. Although many in the community have bristled at regulations such as New York state’s notorious BitLicense, Novogratz said that most regulators have been working with bitcoin — rather than against it.
That may change, however, if the bitcoin price continues to rise at a breakneck pace and regulators begin to perceive it as a threat to the stability of the domestic economy.
“I’ve got concern that if price movements go higher we’re going to get more regulation,” Novogratz said. But “I think it’s hard to shut down. … I don’t think that’s a probability.”
While the government has little power to regulate the Bitcoin network itself, regulators could make life difficult for bitcoin users, and more significantly — businesses that engage with cryptocurrency or provide services to bitcoin users.
In the short-term, a hostile regulatory stance could render bitcoin even more volatile than it already is and potentially lead to a severe price correction. Nevertheless, as Novogratz pointed out, cryptocurrency usage is not isolated to one geographic region, limiting the ability of regulators to curtail its ascent.
“We’re in a speculative frenzy. Period. Stop. How long can it go? who knows,” Novogratz concluded, contrasting the rise of bitcoin with the dot-com bubble of the late 1990s, which he says was largely a U.S. phenomenon. “What’s interesting about this is it’s global”.
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