The former head of risk at Credit Suisse believes that the next cryptocurrency bull market will arise from “regulatory clarity” in the United States, which he expects to occur in early 2023.
Speaking to Cointelegraph, CK Zheng, the former head of valuation risk at Credit Suisse, said that some of the regulatory efforts underway in the US will soon open the doors to traditional crypto finance.
Zheng is a former CEO of investment bank Credit Suisse who left his position in July 2021 to co-found ZX Squared Capital, a cryptocurrency hedge fund targeting family offices and high net worth individual clients.
Cheng said that there has been a dramatic change recently in the attitude of traditional institutions towards cryptocurrency, with many people dipping their toes in crypto waters for the first time.
In August, one of the world’s largest asset managers, BlackRock, partnered with crypto exchange Coinbase to provide its institutional clients with access to Bitcoin (BTC) and cryptocurrency through Coinbase Prime.
Recently, several major names in finance have teamed up to create a digital asset exchange serving both institutional and retail investors, which is backed by financial giants including Charles Schwab, Citadel Securities and Fidelity Digital Assets.
“At the moment, you see a lot of traditional financial institutions getting involved in the crypto space […] You can see huge interest,” said the hedge fund manager.
Zheng also emphasized that there is more “waiting for further clarification of regulations in the US,” before jumping to:
“This is going to really open the door to traditional financial institutions, you know, bringing a lot of institutions and investors into the space. So I would say this is how the next bull market will start.”
He also believes that the executive order issued by US President Joe Biden earlier this year was a major signal to traditional investors, although he admitted that “the devil is in the details” when it comes to how cryptocurrency trading is regulated and whether cryptocurrency is It will be regulated as a commodity or a security.
“From an institutional perspective, as long as the regulations are clear, that gives the institutional investor a very clear path to see that they are not getting bogged down in the regulatory issues […] that will bring institutional investors into the space,” he added.
Related: ‘Fear of the unknown’ holding back crypto-trading investors – Bloomberg Analyst
When asked when the tipping point will occur, Cheng said he expects regulatory clarity to be “embodied” sometime early next year:
“So hopefully, by early next year, there will be something more realistic. That will help, you know, the market in terms of sentiment in terms of people’s perception [of cryptocurrencies]. I think regulation will help with that.”
When asked how bitcoin prices will move in the near term, Cheng said he expects October to be “extremely volatile” for bitcoin.
“October is a very volatile period of time, especially when combined with rising inflation, with a lot of controversy over the Fed and policy change. The concern is that if the Fed tightens too much, the US economy could actually go into a severe recession.”
Zheng believes that this uncertainty will lead to a lot of volatility in both the stock and cryptocurrency markets but will stabilize by next year. Meanwhile, the months leading up to the next Bitcoin “halving” in 2024 could start another “bullish market.”