What Price Drops and Regulations Mean for the Future of Crypto🤔

The cryptocurrency market is a volatile place with regular peaks and valleys. Because of the gyration, digital coin investments seem like scary, enigmatic, and unpassable opportunities for swaths of people. On the other end of the spectrum exist a myriad of doubters, skeptics, and deniers that claim the coins to be a worthless, passing trend.

Both sides truly have compelling arguments.

In January, the cryptocurrency market saw a steep drop of double-digit percentages, ultimately resulting in a collective loss of more than $100 billion.

There are many factors that may have contributed to the fall; we’ll get to the bottom of ultimate cause momentarily. Many have speculated that part of the reason for the decline is linked to governmental oversight around the globe.

Some claimed the dive was a direct result of news from South Korea that plans were being made to ban cryptocurrency trading in the country. Days later, Bloomberg reported that the Chinese government, who has already banned ICOs, “. . . [planed] to block domestic access to homegrown and offshore platforms that enable centralized trading.” By the end of the month, evenFacebook would ban ads relating to cryptocurrencies and ICOs.

In more recent developments, earlier this month the Reserve Bank of India issued a statement that declared all entities under its governance would have three months to cut ties with all cryptocurrency-based services, including the nation’s banks. The statement cited consumer protection and anti-money laundering efforts as the reason for the prohibition.

At the same time, the State Bank of Pakistan made a similar move to restrict its banks and financial services from utilizing cryptocurrencies, stating that digital coins are “. . . not legal tender, issued or guaranteed by the Government of Pakistan,” noting that, “. . . SBP has not authorised or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.” Furthermore, any crypto users who transfer digital monies outside of Pakistan could face prosecution.

Between the dramatic fall of prices, constant speculation as to their viability, and outright refusal by certain nations to engage in crypto-based transactions, the potential future of cryptocurrencies seems to be highly unstable and questionable.

Before diving into what the future of cryptocurrencies looks like, let’s examine the ultimate cause of January’s downfall.

The Reason Behind Crypto’s Crash

The the cause behind the massive drop in crypto value seems to be ambiguous, at best. However, a report from The Wall Street Journal claims that the crash was likely caused by the decision of a lone individual: Brandon Chez, founder of coinmarketcap.com.

Chez’s site tracks current valuations of a myriad of cryptocurrencies by aggregating data from various currency exchanges. In 2017, the site skyrocketed to become one of the most visited destinations on the web, outranking sites like Coindesk, Coinbase, and others.

Shortly before the crash occurred, CoinMarketCap opted to delete South Korean exchanges from its algorithms, citing that the country’s prices were artificially inflating Bitcoin prices through consistently remaining valued at significantly higher prices than anywhere in else in the world.

After removing the country’s bids from the site, prices abruptly plummeted. For instance, Ripple’s (XRP) coin dropped from $3.40 to $2.60 in a single move.

After the downturn, CoinMarketCap commented on Twitter that the site, “. . . excluded some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”

While this is exactly the type of instance that calls cryptocurrency’s shining future into question, it doesn’t mean that digital coins will die an untimely death.

The Future of Digital Coinage

Underneath the dramatic headlines and cries for investors to pull out and governmental to step in, cryptocurrencies and blockchain technology continue to thrive. In fact, nine of the blockchain-based startups that reside on the 2018 Forbes Fintech 50 list are in the process of establishing infrastructure for public crypto markets, as well as future projects that might alter how financial activities are carried out and documented.

For instance, number twelve on the list, a blockchain and Bitcoin data and analytics company called Chainalysis, already possesses massive governmental users such as the FBI, the IRS, and Europol. At the same time,Symbiont — another member of the Fintech 50 — is collaborating with monolithic financial organizations such as Vanguard.

The crypto bubble has been inflating for the past year. Because of the various elements in play (massive investment, fear of governmental regulations, Brandon Chez, etc.) a significant amount of air has been expelled from that bubble.

This does not point to cryptocurrency’s demise or the idea that it is a scam. Instead, crypto is currently experiencing a similar trend seen in the late 90’s that resulted in the blowout of the dot-com bubble.

Did that burst result in the end of the internet? No. In fact, within 10 years, digitally-based entities came back bigger, stronger, and more stable than could have been conceived before the pop.

As billions of dollars drained from the crypto market in January, echoes of the 90’s rang throughout the internet; this is the trend we are witnessing with cryptocurrencies.

This technology is still in its infancy and many are looking to call its time of death before it has ever truly lived. Both cryptocurrency and blockchain technology arrived in mainstream consciousness with an unsettling explosion. That chaos has brought with it the exact kind of reaction many would expect from such a massive disruption.

What the digital currency industry is going through is little more than growing pains; and what the doubters are calling a sham is the arrival of a new paradigm. Through fluctuations and regulations, the foundation for the blockchain and cryptocurrency-controlled era is being laid.