Regulatory clarity will drive the next bull run — hedge fund co-founder

A former head of risk at Credit Suisse believes the next crypto bull market will stem from “regulatory clarity” in the United States, which he expects to happen in early 2023.

Speaking to Cointelegraph, Credit Suisse’s former head of valuation risk CK Cheng said some of the regulatory efforts underway in the US will soon “open the floodgates” from traditional finance to crypto.

Cheng is a former executive at investment bank Credit Suisse who stepped down in July 2021 to co-found ZX Squared Capital, a crypto hedge fund targeting family offices and high-net-worth individual clients.

Cheng said there has been a recent sea change in the stance of traditional institutions towards crypto, with many dipping their toes into the crypto waters for the first time.

In August, one of the world’s largest asset managers, BlackRock, partnered with cryptocurrency exchange Coinbase to offer its institutional clients access to Bitcoin (BTC) and crypto through Coinbase Prime.

Most recently, several big names in finance came together to create a digital asset exchange serving institutional and retail investors, which is backed by financial giants such as Charles Schwab, Citadel Securities and Fidelity Digital Assets.

“Nowadays, you see many more traditional financial institutions getting involved in the crypto space […] You can see a lot of interest,” the hedge fund manager said.

Cheng also stressed that there are many more “waiting for the regulation in the US to become more clear,” before jumping in:

“That’s really going to open the door for traditional financial institutions to, you know, bring a lot more institutions, investors into the space. So I would say that’s how the next bull market is going to start.”

He also believes that US President Joe Biden’s Executive Order earlier this year has been an important signal to traditional investors, although he admitted that “the devil is in the details” when it comes to how will regulate cryptocurrency trading and whether a cryptocurrency will be made. considered as a commodity or a security.

“From an institutional perspective, as long as the regulation is clear, that gives an institutional investor a very clear path to see that they don’t get bogged down with regulatory issues. […] this will bring institutional investors into the space,” he added.

Related: “Fear of the unknown” prevents investors from trading cryptocurrencies, Bloomberg analyst

Asked when the tipping point will be, Cheng said he expects regulatory clarity to “broaden” early next year.

“So hopefully by early next year there will be something much more concrete. And that will help, you know, the market in terms of sentiment in terms of people’s perception [of crypto]. I think regulation will help with that.”

Asked when he expects BTC prices to move in the short term, Cheng says he expects October to be a “very volatile” month for BTC.

“October is a pretty volatile time period, especially when combined with high inflation, with a lot of debate in terms of the Fed and policy change. The concern is that if the Fed tightens too much, the economy America may enter a severe recession.”

Cheng believes that this uncertainty will create a lot of volatility in both the stock market and crypto, but it will stabilize in the coming year. At the same time, the months leading up to Bitcoin’s next “halving” in 2024 could usher in “another bull market.”