Bitcoin and the entire cryptocurrency market saw a massive decline over the past few days. The world’s largest cryptocurrency went to its lowest value of 2018 by going below $10,000. Other currencies also suffered double-digit losses in what was one of the worst weeks in the market’s history.
The cryptocurrency market cap went down by almost $250 billion. In the same week, BitConnect announced the shutdown of its lending and exchange platform due to allegations of it being a Ponzi scheme and having received multiple cease and desist letters.
What happened all of a sudden?
A new wave of regulation took the cryptocurrency market by storm and drove out many investors from the market. It was reported that South Korea is set to ban cryptocurrency trading altogether in the country as it had failed to stop cryptocurrencies like Bitcoin inflating. This was supported by the fact that the South Korean military had already banned trading for its soldiers and had put up countermeasures to prevent them from doing so. This quite possibly led to a lot of panic selling amongst investors who thought they’d lose all of their investment.
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South Korea is one of the largest contributors to the cryptocurrency market, therefore, it makes sense why their decision to ban cryptocurrency trading could’ve contributed to the crash.
However, this time it’s different. Bitcoin and other currencies have seen a decline before as well due to the South Korean government imposing strict regulations. This time, it wasn’t just South Korea, it was a number of countries that decided to regulate the inflating cryptocurrency market.
The United States also started regulating its cryptocurrency market through SEC. The newly formed cyber unit for SEC filed charges against PlexCorps for allegedly defrauding investors through a questionable ICO. Jay Clayton, the SEC chairman also warned crypto investors that they’ll begin monitoring the cryptocurrency market. Many exchanges will now be on the lookout especially since the shutdown of BitConnect.
Apart from South Korea and the United States, China has also been imposing stricter regulations against cryptocurrency. Chinese officials said that they would consider the possibility of completely banning cryptocurrency trading. They have also banned Initial Coin Offerings (ICOs).
Chinese investigators found out that many cryptocurrency trading activities are linked to activities such as money laundering. Thus as China moves to crack down on such activities, it is set to ban cryptocurrency trading in some capacity at least if not altogether.
A global movement towards regulating the crypto market has hurt the entire market quite substantially. However, it might be for the better as we look towards the future.
There was a reason that Bitcoin and the entire crypto market was able to surge massively in short periods of time. Such massive rises are not normal. The cryptocurrency market had remained unregulated for a large period of time where fraudulent activities were left unmonitored.
For example, activities like “pump and dump” scams could’ve been rampant and according to the Business Insider, this was the case in US exchange Bittrex. In such scams, investor groups purposely inflate cryptocurrency prices through mass buying thus causing the illusion of a boom.
Bitfinex, another exchange also once revealed that it had detected manipulation activities being carried out on its platform and had deleted the accounts of those involved. Actions like the “pump and dump” and “spoofing” in regulated markets are illegal. However, as mentioned the cryptocurrency market had remained unregulated for the longest period of time. Therefore, when regulation came in, people indulging in these activities were either exposed or they exit the market before they were caught.
Therefore, the current crash doesn’t mean that the cryptocurrency story is over, it’s far from over. Thanks to regulators like SEC and FINRA, the cryptocurrency market will now be a better version of itself. Cryptocurrency still has great potential, perhaps currencies like Bitcoin might not be at the top nor might they surge as quickly as they had before.
Other currencies such as Ripple offer real solutions to real-world problems, a fact that can’t be overlooked. Therefore, the cryptocurrency market will recover, it has enough mainstream attention now to successfully make a comeback. It has already recovered quite a bit from the crash as the market cap is back to $592 billion, over a $100 billion up from its state during the crash. With regulators ensuring no manipulative activity occurs, there might be better times coming for the cryptocurrency market and its investors.