What the FUD? Bitcoin Market Beset by January Woes
It has been a depressing fortnight for anybody reading various mainstream headlines touting the ‘end of Bitcoin’ and the arrival of the ‘crypto bubble’ crash. Unsurprisingly, the most recent cryptocurrency market slump has led to naysayers stepping onto their soapboxes, crying out messages of ‘I told you so’.
Their rhetoric is not unfounded, given that the overall cryptocurrency markets have suffered two dramatic corrections in under a month, one just before Christmas and the most recent last week. So-called industry experts have been voicing their opinions in interviews with mainstream media, speculating on the burst crypto bubble without any real evidence to show that the markets are irreversibly damaged.
What we know
A wave of uncertainty in South Korea led to massive sell-off of cryptocurrencies last week, as traders unloaded amid fears of regulatory clamp downs from the government. Those fears were led by misleading reports of an all out cryptocurrency trading ban in a country which accounts for 20 percent of global trades.
It is now understood that South Korea will only ban anonymous trading - meaning people wishing to trade cryptocurrencies need to do so through authorised exchanges using a registered bank account. Furthermore, foreigners and minors in the country are now prohibited from cryptocurrency trading, while the government will tax exchanges in line with existing policies.
This was coupled with murmurs of further regulatory moves in China, which has already banned cryptocurrency exchanges in the country. Unsurprisingly, the markets reacted as they would with any hint of bad news, which has led to bearish attitude.
Banks, financial institutions still wary
Financial service giant UBS is particularly bearish towards Bitcoin. Speaking at the World Economic forum this week, chairman Axel Weber said the company had advised clients to steer clear of investing in Bitcoin. In an interview with CNBC, Weber said:
“Retail clients, who don’t fully understand these products, should be protected from going into these products, because if there is a retail client affected in the future, the question will be again who was the bank that sold them these products and then banks will be blamed again for what has happened.”
Weber went on to say that the growing interest in cryptocurrencies around the world will inevitably lead to further regulation. Regulations, as he told Bloomberg in another interview, could lead to further market corrections.
Earlier this week, Wall Street analyst Peter Boockvar suggested that Bitcoin could drop as low as $1000 in 2018. He also attributed the rise in popularity of cryptocurrencies to their inflation-proof nature and scarcity.
Governments hold the future of cryptos
One theme that is becoming increasingly clear is that mainstream investment institutions are still worried about regulations crippling the future of cryptocurrencies. As Weber noted in his interview with Bloomberg, investors’ interest is always piqued by growth in value of any asset. He admits that cryptocurrencies have not gone unnoticed, but the uncertainty of their future is too risky for institutional investors to go in 100 percent.
However, what goes unspoken by critics is that any positive moves by countries could bring about exponential growth and adoption of virtual currencies. This year undoubtedly holds a lot in store, and it seems far too early in the year for people to be writing off every single cryptocurrency.