It's that time of year again, if you ask the right person. January saw bitcoin's historic gains completely wiped out. There are still jokes circulating in crypto trading forums about surviving the month, as if it were a legendary blizzard. However, the bleeding might not be over yet.
All coins have been falling, shedding over 50% of the crypto market's value over the past month. Some might try to convince you that this is due to January's "traditional selloff," perhaps following the Christmas season as credit card bills are being paid. The British tabloid, Express, referenced Professor Gavin Brown's opinion that East Asians want to cash out before the upcoming Chinese New Year celebrations.
Take Express's histrionic headlines with a grain of salt. There is no magic pill. There are plenty of other factors driving the sell-off. However, one cannot separate the story of bitcoin from those of other currencies. Bearish attitudes seem not to distinguish between the prospects of these various coins, rather they seem to be borne out of pessimism about the entire market.
Rounding back to South Korea and China, the two countries have led a regulatory offensive against all cryptocurrencies. China has brought down a heavier hammer - outright banning mining and exchanges across the country. Such regulations led Chinese-founded Binance to relocate to Tokyo late last year. The move is a remarkable one, given the strongest mining operations have operated out of China for a while. Still, some Chinese projects, like Bytom, are alive and well, indicating that residents are still active. Even Binance claimed in early January that Chinese users represented its fourth largest regional customer base.
Rumors of a total ban in Seoul drove sell-offs in the middle of January, as Korean tax authorities moved against some smaller exchanges. That only set the tone, though. South Korea has clarified its policy since then. Anonymous transactions there are a thing of the past, as of January 30th. However, public enthusiasm for trading seems to have cemented the bitcoin culture across the country.
The unraveling of tether (USDT) does coin enthusiasts no favors. After months of doubt as to whether tether was solvent, word got out last week that US regulators did indeed subpoena the Tether/Bitfinex leadership. The severed relationship with their auditor also hurt the confidence investors had in the dollar-pegged token. Alternatives, like dollar-backed token TrueUSD and gold-backed token GOLDX, are pitching themselves as alternative stablecoin.
Then, last week, India's Minister of Finance stated his intent to outright ban crypto trading. Even though Delhi walked back the tough rhetoric, Indians are still anxious. Such prohibitive policies in China and India would impede the entire market.
Spikes in value are still heavily correlated to new demand to buy into the global cryptocurrency enthusiasm. Should prospective investors be cut off from investing, the potential for gains clearly declines.
The Bitconnect scandal certainly came at a time unfitting for crypto. While voices like Ethereum founder, Vitalik Buterin, called it a Ponzi scheme for months, warnings went unheeded. On January 4th, US courts ordered the exchange to halt operations after Bitconnect was caught trading securities without a license. From there, Bitconnect's own coin (BCC) tumbled in value, and the exchange shut down on January 17th.
Another story of investors losing everything is the last thing an industry trying to shake off a snake oil reputation needs. Perhaps even more unsettling for the market, the BCC coin, that the company launched, is still trading. In fact, it recently saw an uptick in value to over $9. This demonstrates that many traders might not be aware of goings-on in the market, and are making bets on bargain coins hoping to make a quick profit day-trading.
The notion that new players buy bitcoin on credit raises questions about the stability of the market. Such stories has institutions like Lloyds Bank and Bank of America banning credit-backed crypto purchases. Add in a ban on Wavecrest's bitcoin debit cards and Facebook's ban on crypto ads, you have major doubts about the industry's reputation.
Legitimate financial and media players now cast the crypto boom as a massive get-rich-quick scheme.
Of course, remove December and January from the all-time crypto investment timeline and you are left with unremarkable similarity. The January sell-off might very well be a needed market correction - admittedly a drastic one - following unsustainable market gains driven by sudden global interest.
While rumors of bans, and declarations of intended bans, have been aplenty, such rumors have been dispelled and harsh rhetoric has been tempered.
Other countries are embracing regulations and clear tax regimes, a sure sign that those countries will keep trading legal and expect it to become more popular. The United States, Australia, and Israel are just a few examples.
As Bitconnect goes the way of the dodo and tether frays, more compliant exchanges and solvent stablecoins will emerge. We already see efforts in this regard. Problems exchanging crypto for fiat currencies are front and center on problem-solvers' desks.
New mainstream interest will hasten more businesses to accept popular coins as a means of exchange. Last week, one fan even convinced TickPick to take satoshis in exchange for a ticket to Super Bowl LII. There is reason to believe full support for Super Bowl LIII tickets would not be in place next year.
This is not crypto's first steep decline. It could also be a sign of healthy response to real-world events, that investors are not so blind.
Unlike the few poor souls unaware of how worthless Bitconnect's dimes are nowadays, market participants are getting smarter. Many anticipate change and embrace it. With more regulations comes more safeguards, alleviating the anxiety of anyone who has not yet invested.
If there is anything to the seasonal bear mentioned above, maybe the beginning of the year will always carry news of new taxes and financial regulations. Investors should gird their loins for such announcements in the future.
Put in for the long term and HODL your line, but do not expect a quick buck.
All coins have been falling, shedding over 50% of the crypto market's value over the past month. Some might try to convince you that this is due to January's "traditional selloff," perhaps following the Christmas season as credit card bills are being paid. The British tabloid, Express, referenced Professor Gavin Brown's opinion that East Asians want to cash out before the upcoming Chinese New Year celebrations.
Take Express's histrionic headlines with a grain of salt. There is no magic pill. There are plenty of other factors driving the sell-off. However, one cannot separate the story of bitcoin from those of other currencies. Bearish attitudes seem not to distinguish between the prospects of these various coins, rather they seem to be borne out of pessimism about the entire market.
Rounding back to South Korea and China, the two countries have led a regulatory offensive against all cryptocurrencies. China has brought down a heavier hammer - outright banning mining and exchanges across the country. Such regulations led Chinese-founded Binance to relocate to Tokyo late last year. The move is a remarkable one, given the strongest mining operations have operated out of China for a while. Still, some Chinese projects, like Bytom, are alive and well, indicating that residents are still active. Even Binance claimed in early January that Chinese users represented its fourth largest regional customer base.
Rumors of a total ban in Seoul drove sell-offs in the middle of January, as Korean tax authorities moved against some smaller exchanges. That only set the tone, though. South Korea has clarified its policy since then. Anonymous transactions there are a thing of the past, as of January 30th. However, public enthusiasm for trading seems to have cemented the bitcoin culture across the country.
The unraveling of tether (USDT) does coin enthusiasts no favors. After months of doubt as to whether tether was solvent, word got out last week that US regulators did indeed subpoena the Tether/Bitfinex leadership. The severed relationship with their auditor also hurt the confidence investors had in the dollar-pegged token. Alternatives, like dollar-backed token TrueUSD and gold-backed token GOLDX, are pitching themselves as alternative stablecoin.
Then, last week, India's Minister of Finance stated his intent to outright ban crypto trading. Even though Delhi walked back the tough rhetoric, Indians are still anxious. Such prohibitive policies in China and India would impede the entire market.
Spikes in value are still heavily correlated to new demand to buy into the global cryptocurrency enthusiasm. Should prospective investors be cut off from investing, the potential for gains clearly declines.
The Bitconnect scandal certainly came at a time unfitting for crypto. While voices like Ethereum founder, Vitalik Buterin, called it a Ponzi scheme for months, warnings went unheeded. On January 4th, US courts ordered the exchange to halt operations after Bitconnect was caught trading securities without a license. From there, Bitconnect's own coin (BCC) tumbled in value, and the exchange shut down on January 17th.
Another story of investors losing everything is the last thing an industry trying to shake off a snake oil reputation needs. Perhaps even more unsettling for the market, the BCC coin, that the company launched, is still trading. In fact, it recently saw an uptick in value to over $9. This demonstrates that many traders might not be aware of goings-on in the market, and are making bets on bargain coins hoping to make a quick profit day-trading.
The notion that new players buy bitcoin on credit raises questions about the stability of the market. Such stories has institutions like Lloyds Bank and Bank of America banning credit-backed crypto purchases. Add in a ban on Wavecrest's bitcoin debit cards and Facebook's ban on crypto ads, you have major doubts about the industry's reputation.
Legitimate financial and media players now cast the crypto boom as a massive get-rich-quick scheme.
Reasons to be optimistic?
Of course, remove December and January from the all-time crypto investment timeline and you are left with unremarkable similarity. The January sell-off might very well be a needed market correction - admittedly a drastic one - following unsustainable market gains driven by sudden global interest.
While rumors of bans, and declarations of intended bans, have been aplenty, such rumors have been dispelled and harsh rhetoric has been tempered.
Other countries are embracing regulations and clear tax regimes, a sure sign that those countries will keep trading legal and expect it to become more popular. The United States, Australia, and Israel are just a few examples.
As Bitconnect goes the way of the dodo and tether frays, more compliant exchanges and solvent stablecoins will emerge. We already see efforts in this regard. Problems exchanging crypto for fiat currencies are front and center on problem-solvers' desks.
New mainstream interest will hasten more businesses to accept popular coins as a means of exchange. Last week, one fan even convinced TickPick to take satoshis in exchange for a ticket to Super Bowl LII. There is reason to believe full support for Super Bowl LIII tickets would not be in place next year.
This is not crypto's first steep decline. It could also be a sign of healthy response to real-world events, that investors are not so blind.
Unlike the few poor souls unaware of how worthless Bitconnect's dimes are nowadays, market participants are getting smarter. Many anticipate change and embrace it. With more regulations comes more safeguards, alleviating the anxiety of anyone who has not yet invested.
If there is anything to the seasonal bear mentioned above, maybe the beginning of the year will always carry news of new taxes and financial regulations. Investors should gird their loins for such announcements in the future.
Put in for the long term and HODL your line, but do not expect a quick buck.