The market risk dimension is the adoption risk that any new technology faces. Unfortunately, folks who don't care are more representative of this than bitcoin opponents.
The technological risk dimension is the possibility that the underlying technology will fail. The regulatory risk dimension, however, receives the most attention, and its intricacies are frequently misunderstood. As a result, the market's sluggish development, as well as those intricacies, will be highlighted in this week's news cycles.
Regulatory and technological risks will be the focus this week. Both dangers are exaggerated. Bitcoin's governance mechanism is validated through mining. Bitcoin commoditizes governance by turning the corrupting power of government into a "commodity" that can be supplied by anybody with an internet connection.
The sole advantages are lower energy costs and a faster processor, both of which North American miners have demonstrated they can match.
Despite mining thunder from China and US regulators and shocking reports that US federal law enforcement had found a means to take Bitcoin out of the dark, this week's cryptocurrency markets exhibited a deeper grasp of regulatory and technology dangers.
More miners will be motivated by bitcoin's price if it climbs. Stopping bitcoin mining, at least through legislation, would be difficult for Washington and Beijing as long as bitcoin is running on at least one computer. The government's ability to oversee crypto exchanges and other off-chain service providers poses a greater regulatory risk.
Slow progress on crypto-friendly regulation, such as banking monitoring and the approval of a bitcoin exchange-traded fund, is also a possibility.
It's not as if mining is impenetrable. Mining can be harmed by regulatory risk at the entrances and exits since it lowers the price. It's vital to distinguish between that and a regulatory risk that jeopardizes Bitcoin's security.
In cryptocurrencies, the market appears to be acquiring a clearer awareness of the differences between technology risk and regulatory risk. That, at least for the time being, is a sign of increasing efficiency. That relationship, though, might shift swiftly given the uncertainties between retail and institution-driven market cycles.