After a period of extreme volatility in recent weeks, cryptocurrencies – including Bitcoin – look like they might have started to turn a corner.
Bitcoin in particular, rallying from a six-week low, is now trading at above $8,000 (£7,000). And this recent surge appears to be linked to positive news from a group of government finance big wigs.
This week, the G20’s finance ministers and central bank governors are meeting in Buenos Aires to discuss digital assets. Governor of the Bank of England and Financial Stability Board chairman Mark Carney, who is currently responsible for co-ordinating financial regulation in the G20, said in a letter published on Sunday that cryptos don’t currently pose a threat to the world’s economy – which was taken as a good sign by investors.
He said in the letter: “The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system.
“Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited.”
However, he added a note of caution in his letter saying: “The market continues to evolve rapidly… and this initial assessment could change if crypto-assets were to become significantly more widely used or interconnected with the core of the regulated financial system.
“Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing.”
He finished the letter by saying: “At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.”
Essentially, Bitcoin investors are hopeful that this statement means cryptocurrency regulation is a long way off, hence the bounce back in prices.
The latest expert advice from Fiona Cincotta, senior market analyst at City Index, is to hold your crypto investments, which sounds like a pretty good idea considering how many ups and downs there are in the market.