The value of cryptocurrencies has plunged more than 50 per cent this year, but some analysts are upbeat the asset class will grow more popular and mature this year, with a gradual increase in trading volume and decrease in volatility. The catalysts include regulatory clarity that could attract institutional investors into a market currently dominated by retail players.

The market capitalisation of cryptocurrencies reached US$261.6 billion on Sunday afternoon, reflecting a drop of 57 per cent since the beginning of the year, according to the CoinMarketCap.com. That follows a 34-fold increase in 2017, underscoring the incredible volatility of the budding industry.

Last year’s market was “irrational”, largely due to the lack of regulatory oversight and institutional investment, said Adrian Lai, founding partner Orichal Partners, a cryptocurrency investment firm in Hong Kong. But he expects more regulation which will reduce market manipulation and volatility, and encourage institutional participation.

Governments across the globe have already increased their oversight on cryptocurrencies and initial coin offerings, a means by which start-ups and other groups raise money issuing their own cryptocurrencies. “Regulators are not banning the development of cryptocurrencies, but are trying to better regulate the market, which should help the industry mature,” Lai said.

Jay Clayton, chairman for the US Securities and Exchange Commission (SEC), said on April 5 that the recent crackdown by regulators is aimed at driving out fraud to protect consumers. Distributed ledger technology has “incredible promise for the financial industry,” he said. Read more from scmp.com…

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