Cryptocurrency prices dropped by as much as 40% overnight. With plunges across the board hitting all the major tokens. With staunch crypto critics crying that the bubble is finally popping. But is it really?
It’s certainly a harsh correction. One that is going to give a lot of traders a reality check. But, it isn’t the doomsday scenario that some have forecast.
Though there is always the possibility that it could happen, it’s looking less likely than ever.
Bitcoin and cryptos have been beaten down time and time again. Yet, every time they bounce back. It’s just that recently the bounce has happened in a matter of days rather than weeks or months.
Whether this correction will take longer to remedy is an unknown to all. What we do know though is that this correction is one we’ve seen before.
Fear from Asia
The source of the crash is being blamed squarely on Asia — namely, China and South Korea. China in particular has a long and turbulent history with bitcoin. In their struggle for control over citizens’ finances they’ve tried to stem crypto trading more times than we can count now.
They’ve tried banning bitcoin itself, crypto exchanges, ICOs and even bitcoin miners — people who mint new bitcoins by solving complex equations on specialised computers. However, once again it’s actual trading that’s in the crosshairs once more.
Chinese authorities are now looking to shut down all exchanges in the country, after the ban of local exchanges last September. An event that caused a massive price correction in cryptos. Now, the government is trying to stop access to bitcoin once again, looking to ban foreign and local platforms that allow bitcoin trading.
As I said, we’ve seen it before and we’ll probably see it again. Every time it causes a decent crash and every time prices recover.
South Korea may follow suit
Like China, South Korea is also concerned about the bitcoin frenzy. And over the weekend the nation issued a new set of trading guidelines. One that will require South Koreans to use their real name for crypto trading accounts.
But, the announcement also included this statement:
‘The proposed shutdown of exchanges that the justice minister recently mentioned is one of the measures suggested by the justice ministry to curb speculation.’
That was enough to spark a media frenzy on a suspected crackdown. One that fanned the flames of fear among traders. It led to a whole lot of confusion in South Korea and around the world. Though many news outlets failed to include the full statement, which included this comment,
‘A governmentwide [sic] decision will be made in the future after sufficient consultation and coordination of opinions.’
Eventually a representative from the Korean presidential office stepped in and cleared up the confusion. Stating that no decision had been made.
Confusion reigns supreme
Ultimately, it’s all just a lot of speculation at this point. Just like cryptos themselves.
We don’t know whether or not these crackdowns will go ahead. All the market is doing is preparing for the worst. But we’ve seen these threats before and every time it amounts to nothing.
Perhaps this time it will be different. Maybe cryptos will be able to move on from these silly political games. It would certainly help stabilise the market if they did. But that’s wishful thinking on our part.
It’s not the first threat from a government thrown at crypto and it certainly won’t be the last. Each time it happens though, the market gets a little bit stronger. It just takes time.
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Junior Analyst, Money Morning