The Current and Future State of Crypto 2/5/18
Image From: Itsblockchain.com
The Current and Future State of Crypto:
Everyone wants to know what will happen next in the cryptocurrency market as a whole. Is it over? Was it a scam? Will it ever go back up? This is the common sentiment portrayed throughout the social media world. The air is filled with “I told you so” people, and people who have also lost vast amounts of money.
Image From: Coinmarketcap.com
What Caused this Dramatic downfall?
The real answer? No one really knows. It is likely a combination of many different things, as was the meteoric rise we saw in December 2017. The Bitcoin bull run was one of the most dramatic market rises in history. No one will deny that it was due for a correction as well as some consolidation. This is normal and healthy for overall growth in the crypto space as a whole.
Wild Wild West?
The reason that this has turned into a subsequent crash of large scale proportion, in my opinion, is due to the nature of this “Wild West” market in which we live. Cryptocurrency as a whole, is so young and new, that there are bound to be large amounts of unknowns and surprises. The whole crypto market is run on emotion, rumor, and speculation. It is vastly more volatile than the stock market because there are very few facts or comparisons to go by. There are no earnings reports or things of that nature.
Regulation?
There is also very little regulation, which leads to many problems and varying levels of fraud and criminal activity that can cause dramatic swings in the market. For example, the whole situation with Tether (USDT) could have potentially devastating effects on the market. On the other hand, the more regulation that comes into the crypto space, the more it can also lead to further downfall of the market. One of the best aspects of cryptocurrency is that it represents a free market system better than has been seen in a long time anywhere else.
There needs to be a degree of government regulation in the market, so as to prevent large amounts of market manipulation. But it would also be unhealthy for the government to regulate the crypto market as much as it regulates all other areas.
Image From: Nichemarket.co.za
Tether?
I would have thought that this market crash would be in response to the downfall of Tether. But as of now, there are mostly just rumors of Tether fraud, as well as the U.S. investigating the scene.
Large Scale Manipulation?
There are also rumors that the media and the big money players such as institutions, are scaring the public with talks of demise, in order to buy BTC at a highly discounted rate. There may be some truth to this as I believe the mainstream media tries to manipulate almost every aspect of life. But I don’t necessarily think this is a major cause for the current market crash.
China Again??
There are also people stating that news with China is causing fear in the market. This was the case in September 2017, but not so much now. Yes, China did come out with some recent news that was not great for crypto. William Suberg of cointelegraph.com wrote in his article on 2/5/18 that,
“To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” the South China Morning Post quotes the PBoC-related publication as saying. The quote continues:“ICOs and virtual currency trading did not completely withdraw from China following the official ban… Overseas transactions and regulatory evasion have resumed… [R]isks are still there, fuelled by illegal issuance, and even fraud and pyramid selling.” (Cointelegraph.com)
This is not good news for the crypto market, but is not anything too surprising. China has shown dislike for cryptocurrency before, and is basically making its ban more strict. As said before, this is not good news, but it is also not terribly surprising. It is coming at a bad time, more than anything. Did this cause a dramatic downturn? It likely didn’t cause it, but it may have added momentum to an already downward move in the market.
Image From: armstrongeconomics.com
The Real Reasoning:
So what really caused this substantial bear market? If you remember in January when the market turned red, it really wasn’t caused by anything. Yes events have transpired and news has come out that has perpetuated the downward trend… but the first start of this bear season really had no definitive substantial cause, as it did back in September. The market was due for a consolidation after such a massive run up in November and December. Is this a bit too far of a crash? Sure. But the crypto market seems to vastly exceed expectation, both in the good realm of bull trends, as well as the negative realm of bear markets.
Recovery -
Crypto should make a recovery and move to new heights. The blockchain and tangle technology is too innovative to be simply forgotten. It has the potential to greatly change many parts of life. Even simply in using Bitcoin as a currency or store of value. The idea of being able to send value directly from one person/business to the next, without excess time/money/third-parties, is a revolutionary part of crypto that could provide solutions to many problems.
Image From: The New York Times (Credit Paul Rogers)
Why such Positivity?
This also brings me to the point that there are stated to only be 21,000,000 Bitcoin that will ever be available. So it provides a scarcity and a deflationary aspect of value that has significant value. It is also something of value that has virtually the same value throughout the world. This could potentially solve a major paint point in the current system of having to trade money from one currency to the next for payment or travel.
For these reasons, I am still very bullish on cryptocurrency for the long term. Yes it is very hard seeing so much money lost in the current market downturn. But this could also provide another opportunity to get into cryptocurrency at a better price. This obviously has its risks as well. It is funny how when you should buy and sell goes against what your emotion tells you to do.
DYOR - (Do your own research)
At the end of the day, readers need to decide what they think the future will be for crypto. More research may be required, but hopefully I have given some awareness and content to assist in educating the public. Crypto could in fact die completely. There is always that chance. But it could also change the world and this could only be the beginning. Decide for yourself based on your own research. ;)
(**Everything written, said, tweeted, etc. is based on my personal opinion, my interpretation of the data/material, and is not financial or investment advice whatsoever)
Sources:
Coinmarketcap.com
Cointelegraph.com (Ban Complete: China Blocks Foreign Crypto Exchanges To Counter ‘Financial Risks’ by William Suberg)