Perhaps many readers do not see it that way, but the cryptocurrencies have suffered a correction of such magnitude, and in such a short space of time, that in any other asset it would be called a crash or collapse. Bitcoin, for example, went from trading around $ 20,000 in mid-December to a little over 10,000 a month later.
Falls of almost 50% in about four weeks of hiring, even if we count the holidays, can be considered a financial crash with few precedents.
But what has been the cause of this enormous correction? Many analysts point out that it was a typical crash due to the explosion of the bubble they were in. Some falls that are the prelude to others of similar magnitude.
Other analysts, however, are not so pessimistic. The economist Guillermo Barba gives us this other explanation:
First of all we have to say that a correction such as the one that has begun was already more than expected. At TMR we warn you very early with insistence. Starting from there, the trigger is always the least.
On this occasion, what has triggered this strong general decline has been the fear of greater and tougher regulations around the world and, in particular, total prohibitions on the commercialization of cryptocurrencies in China and South Korea.
Last year, China had already banned 'exchanges' and, as a consequence, investors migrated en masse to operate through South Korea and Japan.
This time, the fear of a very strict regulation and even the closing of exchange exchanges in Korea has many trembling.
Last week, panic broke out over statements by that country's Justice Minister, Park Sang-ki, who told a news conference that there were "big concerns about virtual currency" and that he was "basically preparing a law to prohibit the exchange of cryptocurrencies through exchanges ".
This imprudence of the minister caused a fall in value that angered thousands of investors in his country, which made almost immediately his colleague Kim Dong-yeon, the finance minister, came out to clarify that a ban on exchange exchanges was not "A measure that has been finalized". The damage, in any case, was already done.
He also said that "all government ministers agree on the need for a government response to overheating in speculation in cryptocurrencies and in a degree of regulation."
The point is, as I say, the major correction had to come, and here it is. As I explained in the previous article, this collapse can be extremely violent and still leave the bull market (bull market) with a longer life.
I call it correction because that is how it will be recognized in the future, once the storm - which may last for weeks, months or even years, nobody knows - has passed.
The reasons are several. For example: the value of a network grows exponentially as the number of its users also increases. In fact, with the massive escalation of Bitcoin and other cryptocurrencies, the arrival of new amateur, curious traders, professional investors, etc., some exchanges had to limit the opening of new accounts to try not to saturate their systems too much.
It is to be expected that with the recent collapse there will now be a stampede towards the exits, but sooner or later they will return.
For now, pessimism seems to take over the market. The majority feeling seems to be that 'something bad' will happen with the possible arrival of new prohibitions, limitations, closing of exchanges, accusations of using digital currency for money laundering and financing of terrorism, etc.