After a brief recovery period which saw Bitcoin almost hit $12,000, the cryptocurrency market is down again. Bitcoin dropped to just above $10,000, Ripple has also fallen just below the $1 mark. It’s not just the top 10 that have suffered, almost the entire market has seen a dip in price.
It has been a rocky month for Bitcoin and the rest of the crypto market thus far. Earlier this month, Bitcoin fell massively to below $10,000 going as low as $6000. During this period, the cryptocurrency market also fell below $300 billion market cap. However, the crypto market started recovering since last week and during this period the crypto market rapidly surged to a $500 billion market cap. Bitcoin also made its way past $10,000 and had almost hit the $12,000 mark.
However, the bullish run came to an end as Bitcoin and other cryptocurrencies saw a sharp decline in prices. At 06:34 UTC today, Bitcoin went below $10,000 as well. As of this writing, Bitcoin’s current value stands at $10,095. Other cryptocurrencies such as Ripple, Litecoin etc. have also suffered.
Ripple recently added five new payment clients in four countries. Moreover, there have been reports that hint towards a future upgrade in Ripple’s technology. Despite this, Ripple’s fell below the $1 mark.
According to Nick Kirk, a quantitative developer and data scientist at Cypher Capital, a cryptocurrency trading firm, there was no particular reason for the recent decline.
However, there seems to be more to it because usually, prices of cryptocurrencies increase in value after news like the one for Ripple breaks out. Therefore, there has to be some sort of explanation for the sharp decline in prices.
The crypto decline follows a recent fraud crackdown by the Securities and Exchange Commission (SEC). The SEC charged BitFund, a former crypto exchange for fraud. The exchange was accused of carrying out operations as an unregistered securities exchange and defrauded its users.
The recent crackdown brings uncertainty in the market whether exchanges people rely on are actually reliable or not. It could be a coincidence that prices fell following this news, as there have been other crackdowns as well that haven’t affected the market at all.
Perhaps the most plausible reason which explains the recent downwards trend of cryptocurrencies is reports of crypto regulation being imposed in the UK.
Britain’s Treasury Select Committee of lawmakers recently threatened to introduce new rules that would help regulate the highly risky and volatile cryptocurrency market. The cryptocurrency market is not a stranger to regulation. The first country to take steps against cryptocurrency was South Korea which is also taking steps towards banning cryptocurrency trading in their country altogether.
Other countries also followed in South Korea’s footsteps and restricted the freedom the cryptocurrency market had been enjoying for a long time. Every time a country starts imposing restrictions, the crypto market goes down. Therefore, the most likely explanation for the recent crash would be the UK about to introduce regulatory measures against crypto.
‘People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors,’ said Nicky Morgan, chair of the Treasury Committee.
Recent developments may have lead to panic selling which drove prices down. However, nothing has been implemented yet. Advice from experts on cryptocurrencies will be taken before any action is taken. However, there is now a possibility of crypto regulation in the UK now.
Many people claim Bitcoin to be a failed currency. According to them, this is exactly why regulation is needed in order to ‘protect’ people from cryptocurrency. However, cryptocurrency has its benefits as well. Aside from its flaws, currencies such as Ripple, Litecoin etc. provide solutions to many real-world problems. Apart from that, many firms have come up with innovative ideas with crypto and the Blockchain network at the centre of everything.
Therefore, the British government will need to strike a balance between protecting the people as well as promoting firms that intend to use cryptocurrency in an innovative way. The regulation may bring the price down, but eventually, it will help flush the remaining investors out of the market who are only there to make profit instead of investing in cryptocurrency for its intended purposes.