Gensler Warns: All Cryptocurrencies Are Speculative — Except Bitcoin

Former SEC Chairman Gary Gensler recently stated that cryptocurrencies, other than Bitcoin, are highly speculative and lack fundamental support. His comments come amid Bitcoin's recent price surge towards $92,000, following significant market movements.

Key Takeaways

Gary Gensler emphasizes that all cryptocurrencies except Bitcoin are risky investments due to their speculative nature.
Vanguard has shifted its stance, allowing clients to trade Bitcoin and other cryptocurrencies, which brought immediate market reactions.
A recent Federal Reserve liquidity infusion has also positively influenced Bitcoin and other digital assets.
Market participants anticipate a potential Federal Reserve interest rate cut in December, impacting risk asset sentiment.

Gensler Warns: All Cryptocurrencies Are Speculative — Except Bitcoin

Gensler's Warning on Cryptocurrencies

In a recent interview with Bloomberg, former SEC Chairman Gary Gensler mentioned that cryptocurrencies, excluding Bitcoin, are viewed as speculative assets that lack fundamental backing. His remarks coincided with Bitcoin's impressive recovery toward the $92,000 mark after a previous week filled with market fluctuations due to bond market instabilities and changes among institutional investors.

Gensler highlighted the differences between Bitcoin and thousands of alternative tokens, contending that investors must consider the underlying fundamentals of these cryptocurrencies. He stated: “Putting aside Bitcoin for a minute, all the thousands of other tokens, not the stablecoins backed by U.S. dollars, but all the thousands of their tokens. You have to ask yourself, what are the fundamentals? What’s underlying it?” He pointed out that many of these assets do not yield dividends or generate tangible returns.

Institutional Adoption Surges with Vanguard

Despite Gensler's warning, there was a significant uptick in institutional interest on Wednesday. Vanguard, previously opposed to cryptocurrencies, changed its policy and now allows its 50 million clients to trade Bitcoin, Ethereum, XRP, and Solana ETFs. This decision, initiated by new CEO Salim Ramji, who is also a former architect of BlackRock’s Bitcoin ETF, led to immediate responses in the market, with $1 billion in Bitcoin trading volume occurring just 30 minutes after the trading opened.

Eric Balchunas, an ETF analyst at Bloomberg, underscored the importance of this change, observing that Bitcoin experienced a 6% uptick shortly after the Vanguard announcement. This reversal reflects a significant shift from Vanguard's 2024 stance that ruled out cryptocurrencies in long-term investment portfolios. They now include regulated spot ETFs from leading firms such as BlackRock, Fidelity, Grayscale, VanEck, and Bitwise.

Even conservative estimates of asset allocation suggest considerable potential inflows. For instance, 0.5% of Vanguard's assets could amount to $55 billion, surpassing total inflows expected in the first year of the 2024 ETF cycle. Consequently, the market reacted favorably, with Ethereum climbing 8.3% to reach $3,040, XRP increasing by 7.6% to $2.18, and the total cryptocurrency market capitalization surging 6.5% to $3.22 trillion.

Market Conditions Post-Bond Selloff

Bitcoin's rapid recovery can be attributed to actions taken by the Federal Reserve, which concluded its quantitative tightening program and injected $13.5 billion into the market through overnight funding. Akshat Siddant, the lead quantitative analyst at Mudrex, noted that Bitcoin exchange reserves have dipped to their lowest in years, registering at 2.19 million BTC, which is likely to escalate buying pressure. Current technical resistance levels for Bitcoin are estimated around $96,000, with support found near $87,800.

This uptick in Bitcoin's price follows a tough Monday for the markets, spurred by renewed expectations for a Japanese rate hike that triggered a global bond selloff, leading to further drops in cryptocurrency values.

Meanwhile, Gensler mentioned that despite the extended outage at the Chicago Mercantile Exchange on Thanksgiving, largely due to cooling system issues, he believes the management would have acted more swiftly to address the situation if it had occurred during regular trading hours.

Anticipated Federal Reserve Rate Cuts Boost Market Sentiment

Historically, December tends to be a favorable month for stocks. The expectation of more lenient U.S. monetary policy, particularly after unexpected developments in Japan, has lifted market sentiment. Traders currently estimate an over 80% chance of a 25-basis-point interest rate cut by the Federal Reserve during its December meeting, a jump from the 63% probability seen a month ago, despite officials cautioning against hasty cuts due to persistent inflation concerns.

Gensler Warns: All Cryptocurrencies Are Speculative — Except Bitcoin

As the markets anticipate the upcoming release of the Personal Consumption Expenditures Index— the Federal Reserve’s preferred measure of inflation— investors are on the lookout for clues that could influence the central bank's policy decisions.

Additionally, discussions about potential successors for Fed Chair Jerome Powell are increasing, with White House economic adviser Kevin Hassett emerging as a key figure to watch when Powell's term concludes next year.

On the analytical front, macro specialist Sykodelic, who has over seven years of experience in cryptocurrency, expressed skepticism towards bearish forecasts leading into 2026. “So you’re telling me you’re bearish heading into 2026 when Vanguard aped $1bn in 30 mins, Blackrock ETF is the highest earner for them, QT has ended and rates are continuing to drop, overall macro tailwinds piling up,” he pointed out, asserting that new highs in 2026 might still be achievable despite predictions of deeper corrections based on four-year cycles.

Similarly, analyst Michael Van De Poppe projected that Bitcoin might test the $100,000 mark, possibly even reaching $105,000 in December. However, he cautioned that if Bitcoin drops below the $92,000 support level, a significant correction could send it back towards the $88,000-$90,000 range.