Cryptocurrency crash? Or, just a correction?
After cryptocurrencies hit an all-time-high market cap of $835 billion on Jan. 7, they crashed to $279 billion on Feb. 6, declining 67 percent in a matter of weeks.
The reasons? Governments and banks are making statements and taking actions that are driving down prices and increasing fears cryptos may be banned, restricted and over taxed.
The long reach of governments worldwide to regulate and or ban digital-currency trading escalated, with South Korea implementing stringent regulations for how cryptocurrencies are purchased and monitored to increase transparency, and China banning initial coin offerings and digital-currency exchanges.
India’s Finance Minister warned, "The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities."
And now, Citi India following the lead of JPMorgan Chase, Citigroup and Bank of America – said that they would no longer allow the purchase of cryptocurrencies with their credit cards.
Moreover, central banks worldwide increased warnings about cryptocurrency trading and increasingly suggest that regulation is inevitable.
"There is a strong case for policy intervention," said Agustin Carstens, general manager of the Bank for International Settlements. Mario Draghi, president of the European Central Bank, called cryptocurrencies "very risky assets," and suggested the ECB was measuring the risks they pose for the eurozone. And International Monetary Fund Director Christine Lagarde said, “It's clearly a domain where we need international regulation and proper supervision."
Even the social media world has turned negative on cryptos with Facebook and Google banning or cracking down on crypto ads.
The Trends Journal has consistently predicted substantial volatility across digital-currency markets, especially in these early stages of crypto-creation, as governments and financial institutions worldwide scramble to impose regulations and controls over the crypto markets.
Indeed, even after the onslaught of government and banking warnings and restrictions, as we go to press, even though many of the currencies are well off their highs, the overall market has stabilized and many of the popular cryptos are significantly up year to date.
In our Trends Journal, we have steadfastly forecast that while some digital currencies will crash, long term the crypto market will grow. One reason is, as the world goes cashless, a sizeable market segment, particularly among millennials are no longer tied to their coin of the realm. They consider cryptos, many of which have production caps, as more valuable than their nation’s fiat currencies which are being printed infinitum.
Secondly, a series of coins that have a blockchain product and/or service function that drives revenue are considered New Age investment opportunities
Indeed, even inside the hallowed halls of prestigious universities, those with international reputations for higher business-education acumen, courses on cryptocurrency and blockchain technology are being taught. At Carnegie Mellon, Cornell, the Massachusetts Institute of Technology, Duke and other prominent business universities, graduate-level courses on digital currencies are being integrated into the curriculum.
Moreover, the Arizona State Senate recently passed a bill allowing property owners to pay their taxes with Bitcoin and other major cryptocurrencies. While the bill needs to pass the Arizona State House before becoming law, the progress so far reflects the growing acceptance of cryptocurrency has become legitimate.
TREND FORECAST: Unlike many governments that are opposed to the crypto’s and are regulating them without understanding the scope of the market, Switzerland, the world banking capital is on-trend, to become, in the word’s of its Economic Minister the world’s “Crypto-Nation.”
With the government’s stated objective to maintain a competitive edge in blockchain technology development while encouraging crypto investment, the Initial Coin Offering industry is moving to Switzerland because it has a large segment of wealthy investors and technology specialists who believe in the profitability of the trend.
And while UBS and Credit Suisse said they would not handle crypto-assets for clients, two Swiss banks, Vontobel and Falcon Bank, agreed to handle cryptocuurency-based investments on behalf of their clients. So, too, have Germany's Fidor Bank and Liechtenstein's Bank Frick.
Other nations, such as Gibraltar, are crafting laws governing regulations that will welcome ICO’s and cryptocurrency trading. And Lithuania has created a business hub to connect blockchain technology investors across Eastern Europe, Canada, Belgium, Australia and Israel. Its central bank has launched a regulatory "sandbox" for startups working with blockchain.
With improved governmental models to encourage and reasonably regulate cryptocurrency investment and ICO’s, a sound foundation is being built. Thus, while there will be volatility in the overall market, the long term trend for growth and profitability persists.