All Red: What Caused The Dramatic Fall Of Cryptocurrencies?

All Red: What Caused The Dramatic Fall Of Cryptocurrencies?
All Red: What Caused The Dramatic Fall Of Cryptocurrencies?

It was in 2017 when cryptocurrencies gained much popularity, the year in which many of them got a hike in their individual values. Fast forward to 2018, the prices have seen a sharp decline and the total market cap has experienced an abrupt drop of more than 60%. This, in turn, has forced investors to put a halt to the mad rush towards cryptocurrencies and look at the matter more calmly.

Many people, experts as well as laypersons, wonder about the reasons behind the dramatic plummet of cryptocurrencies. In this article, we’ve tried to analyze some of the causes, which could have resulted in the sudden fall of cryptocurrencies.

1.   Lack of compliance and regulation

Lack of regulation and compliance has been one of the factors why the value of cryptocurrency is falling in 2018. Ill-defined rules allow people to avoid the traditional restrictions on money or other assets. Most countries use different forms of cryptocurrencies for legal transactions but, in order to do so, they need stricter laws and regulation. Among the countries that announced forthcoming cryptocurrency regulations are the USA, Russia, Japan, India. The European Union has come on the scene as well and claimed cryptocurrency is to be regulated at European level.

2.   Cryptocurrency exchanges ceasing operation in China

The Chinese authorities have notified all cryptocurrency exchanges to shut down trading operations to limit the financial risks of the highly volatile market. Many China-based exchanges, including BTC China and YoBTC, announced they would stop all cryptocurrency trading almost immediately.

3.   Tech companies fighting cryptocurrency promotion

Several tech companies, Facebook, Google, and the latest entrant, Twitter, have been banning cryptocurrency ads, citing the reason that this industry is extremely new, unreliable, unpredictable, and unregulated. By restricting cryptocurrency promotion, these companies are set to protect their worldwide users from illegal transactions and fraudulent activities.

4.   Negative media hype

The topic of cryptocurrencies has been gathering media attention in the past months. As the general public is becoming more aware of the term, the media has been reporting about cryptocurrencies more now than ever. While it’s true that cryptocurrencies have been increasingly in the headlines these days, it is mostly due to negative news. Various frauds, schemes and hacks have alerted customers to think twice before investing and trading cryptocurrencies.

  • January 2018. South Korea banned the use of anonymous accounts for trading cryptocurrency to curb virtual money from being used for crime
  • January 2018. One of the biggest hacks in the cryptocurrency history took place – $530 million was stolen from Coincheck. Coincheck followed up and stated it would later partially recompense traders for the stolen funds
  • February 2018. Austria avowed its determination to regulate cryptocurrency trading with a focus on preventing any kind of money laundering. All large-amount trades should be reported to financial authorities
  • February 2018. The Bank of International Settlements warned about cryptocurrency being a Ponzi scheme and a bubble, and urged the need of regulatory interventions
  • March 2018. The US Securities and Exchange Commission expressed concern about the lack of proper regulation for online trading platforms. Cryptocurrency exchanges dealing with digital assets that are defined as securities should be registered with the SEC

These are just some of the negative news that have shaken the community in the beginning of 2018 and caused the prices of cryptocurrencies to decline sharply in the past few months before reviving in April again. Roller coaster? Here we go again!