The cryptocurrency markets have gone from bestseller to dud in a matter of weeks and it all came down to a shift in government and regulator attitudes towards the cryptomarket and all that it symbolizes.
Bitcoin founder Satoshi Nakamoto created Bitcoin and the all-important blockchain technology in a bid to pry power away from governments and central banks, almost in protest to the 2008 Global Financial Crisis that left many destitute.
The crypto story has been a compelling one, with Bitcoin billionaires and millionaires having shared their stories across the Worldwide Web, driving the cryptomarket ever high, as more investors joined the fray in hopes of a tidy profit and perhaps more.
Sadly for those who decided to invest in Bitcoin in late 2017, the consequences and losses will have been significant, with the only hope being that investors didn’t bet the house on virtual currencies that have very little to no tangible value today.
The collapse of the cryptomarket, that has seen the total market cap tumble from $830bn to $342bn and falling, didn’t come about from investors looking to pile out with the billions, but because of a material shift government sentiment towards cryptocurrencies.
In fact, it’s perhaps surprising that Bitcoin and the rest of the cryptocurrencies have not been outright banned when going through all of the negative media since the start of the year, not to mention China’s temporary bans last year on trading last year and since then ban on Bitcoin mining.
In fact, things couldn’t be bleaker, when considering current events that have rocketed the crypto markets, leading to Bitcoin sliding to sub-$7,000 levels this week.
While China may have been the instigator, the South Korean government led the assault at the start of 2018, with news hitting the wires in early January of an intention to ban all cryptocurrencies in the country. While the government backtracked following a market sell-off and South Korean style protest, the government has banned anonymous trading and has imposed anti-money laundering and KYC processes on the crypto exchanges. The threat of exchanges being closed down remains, though much will depend upon how the exchanges enforce the new regulations. South Korean banks were also the first to ban the use of credit cards to purchase cryptocurrencies. Since then, JPMorgan, Bank of America and Citibank have introduced bans, with the UK’s Halifax, Lloyds, RBS and Virgin banks, having also introduced bans in the last week.
Cutting a material source of funding for cryptocurrency purchases, free money at that, was not too surprising, when considering the speculative nature of investing into the crypto markets. The moves have been since justified when considering the market’s demise this week.
With Facebook banning ICO advertisements, removing a primary advertising platform for the initial coin offering (ICO) market that was more bad news, with this afternoon’s cryptomarket Senate hearing, where the chairmen of the SEC and CFTC will be giving testimony could be another blow for the cryptomarket.
Perhaps pre-empting a material shift in U.S regulations on the crypto markets, the markets were slammed with another bombshell on Monday on news hitting the wires that the People’s Bank of China will be banning all foreign cryptocurrency exchanges.
Fraudulent activity, tax evasion, funding of criminal and terrorist activities make up part of a laundry list of reasons why governments and central banks have come down hard on the crypto markets, with the market having failed to self-regulate as the asset class grew exponentially over the last 12-months.
Satoshi was in search of a decentralized alternative to fiat money, but in the end, the very fact that fiat money is needed to purchase cryptocurrencies means that the two remain intertwined and that leaves the cryptomarket front and center from a government regulatory standpoint.
Until the fraudulent activity ceases and appropriate regulations are imposed to address taxation, classification and the rest, things are unlikely to ease up, though this shouldn’t be the end for the cryptocurrency market, which has delivered a much-needed upgrade to the tech world, with blockchain technology and an alternative to the traditional fiat currency system.