In a much-anticipated move, Brazil’s securities regulator, Comissão de Valores Mobiliários [CVM] authorized indirect investment in cryptocurrencies through foreign funds and acquisition of derivatives. The circular ‘guidelines to investment fund managers’ states that investments funds can invest in “other assets” traded in other jurisdictions if they are regulated in those markets.
This effectively means that investment firms can now buy a share in foreign funds, mostly in cryptocurrency portfolios, including Bitcoin [BTC], Ethereum [ETH] and Litecoin [LTC].
The circular released by Brazil’s Ministry of Finance also warned investors of illegal operations in the space. It warns them of frauds, money laundering and other illicit activities, and advocates investment in cryptocurrencies through regulated exchanges.
“We call attention to money laundering, unfair practices, conducting fraudulent operations or manipulating prices, among others. An adequate way to address such concerns is investment through exchanges that are subject to oversight by regulators with these concerns.”
Daniel Maeda, Superintendent of Institutional Investor Relations at the CVM, in a previous circular, made it clear that firms cannot directly invest in cryptocurrencies, stating that “they are not financial assets”.
Though the report has its set of guidelines, there are no restrictions on which platform an investor can use to purchase cryptocurrencies, provided they meet the regulatory and legal requirements.
The ministry of finance goes on to warn investors to not fall prey to fraudulent ICOs while purchasing cryptocurrencies and advises them to use a six-factor system to check for scams. The key point in the precaution list is the verification of the cryptocurrency technology, ensuring that it is “transparent, accessible, and verifiable by any user.”
The government also asked investors to check whether the base software is open-source and free, and to check whether the arrangements made could lead to a difference in opinions, conflict of interests, or the concentration of excessive powers on the issuer/promoter of the cryptoassets. The use of aggressive sales techniques, the trading liquidity of the cryptoasset, and the nature of its network and validation protocols, and the software used were also warned against.
The profile of the team of developers, as well as their degree of involvement with the project was a point that was emphasized upon by the circular.
In addition, the government agency has raised concern over the pricing of cryptocurrencies, stating that there is no internationally accepted model for calculating a fair price for the investment.
The Ministry of Finance stated:
“One possible parameter, in this sense, is the investment in cryptoassets that contain the permanent disclosure of globally recognized price indices prepared by independent third parties”
Considered a growing cryptocurrency market, Brazil’s market grew from almost non-existent to worth over $2.5B in 2017. The new move is considered by many enthusiasts as a big step towards global acceptance of cryptocurrencies.
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Bitcoin will likely be valued at $100,000 with a market cap of over $2 trillion before the end of 2021
The entire cryptocurrency market seems to be on the brighter side of the market since the beginning of the year. A majority of the coins have recorded significant recoveries from their 2018 slump, a period during which most coins lost over 90 percent of their value, when compared to their all-time highs. Among all the coins in the market, Bitcoin [BTC] aka the digital gold, was noted to be making a massive comeback as the coin breached the $11,000 mark after nearly 15 months. The coin however, soon retracted to settle below the $11,000 level.
According to CoinMarketCap, at press time, Bitcoin was trading at $10,887.27 with a market cap of $93.549 billion. The coin recorded a 24-hour trading volume of $20.757 billion for the past 24 hours and saw a massive rise of over 17 percent over the past seven days.
Anthony Pompliano, Co-founder of Morgan Creek Digital Assets, predicted that the largest digital currency could rise to reach $100,000, before the end of 2021. Pomp added that he was around 70-75 percent confident in this prediction. He stated,
“As I have previously said, making predictions is difficult […] Part of my process as a professional money manager is forming a thesis (price target), identifying a timeline (date), and establishing a confidence level. And then constantly re-evaluating those three aspects of my thought process as I receive new information.”
Pomp however, listed six pointers that have to be understood beforehand. First, this prediction is not an investment advice, and people should do their own research before investing in the digital currency. The second is with respect to Bitcoin’s volatility, with Pomp remarking that since it was a highly volatile market, the coin could witness a significant fall before being valued at $100,000. He stated,
“I anticipate that there will be numerous 20-30% drawdowns from new all-time highs as the asset continues to appreciate in value. These mini-boom/bust cycles should not cause panic, but rather need to be understood as natural market dynamics whenever an asset gains significant value in short periods of time.”
Further, the partner of the investment firm stated that the rise would be driven by several catalysts. This includes institutional adoption, exchange-traded funds and retail product approvals, global instability, governments all across the globe manipulating currencies, markets and economy. He went on to state,
“The market cap of Bitcoin will reach $2+ trillion when Bitcoin is worth $100,000. This is less than 1/3 the market cap of gold and less than 1/40 the global money supply.”
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