It was the threat of a government crackdown that triggered the huge falls we’ve seen in bitcoin this year. A series of announcements from the South Korean government in early January essentially boiled down to banning crypto trading through exchanges in the country.
Now, it may be questionable how well South Korea’s government can actually enforce such a ban. And there’s still a lengthy political process involved before the laws come into effect. But none of that mattered. The emerging idea of bitcoin as a legitimate alternative currency took a major hit.
The price followed.
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As you can see in this three month chart, bitcoin has plunged from its peak of US$19,343.04 to US$9,171.11 at time of writing.
The worst may not be over. Governments the world over are jumping on the bandwagon as bitcoin continues to fall.
India’s Finance Minister echoed early comments on Thursday. He said that the Indian government does not consider cryptocurrencies legal tender or coin. And that the Indian government ‘will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.’
Italy’s Economy Minister spoke on Wednesday, he said:
‘The oversight authorities are ever more active and the central banks are weighing whether to use cryptocurrencies but then, if the phenomenon explodes, they can do harm.’
Many of bitcoin’s hardcore early supporters would shrug at such government criticisms. After all, to them bitcoin is supposed to disrupt and ultimately replace the fiat currencies of central banks and governments. So of course those central banks and governments attack it.
To hear these true believers tell it, government regulation won’t matter. If bitcoin succeeds in supplanting fiat currencies, everyone will be using it eventually. Short-term falls in the meantime are nothing but buying opportunities.
The problem is, the vast majority of bitcoin holders don’t feel that way. The hardcore bitcoin believers have long since lost control of the crypto. First came the curious. Then as the price rose, the speculators bought in. And in 2017, amidst incredible price rises, massive numbers of new investors bought on the fear of missing out.
Those same late-comers have scrambled to get right back out again as the price crashed in January. Their fear of missing out has been transformed into plain old fear.
The falls show no sign of stopping, either. As bitcoin has led, so the others have followed. Almost the entire crypto market has suffered in 2018.
Is this drop in the market the beginning of the end for cryptocurrencies?
Will we see prices continue to fall steadily from here until they hit zero?
Our own crypto experts, Sam Volkering and Ryan Dinse, answer emphatically ‘no’. The crowd of ‘weak hands’ who jumped on the bandwagon in the latter half of 2017 may be easily spooked. It’s not hard for their greed to transform into fear. But for those who understand crypto, who know how it will change the world, even today’s volatility will pass.
Despite the emotional drive behind much of bitcoin and other cryptos’ gains last year, they argue that this boom has real substance behind it. In many ways, cryptocurrencies have already revolutionised parts of global finance and industry. And their greatest potential still lies ahead of them.
The massive institutional investors of Wall Street were late to the party on this one. And many of them still don’t get it. Or possibly claim they don’t, while quietly hedging their bets behind the scenes. More cryptocurrency-based hedge funds are popping up every day.
If the likes of Sam and Ryan are right, the current chaos in crypto markets could be the most important buying opportunity of our lifetimes.
This isn’t the sort of investment you bet your retirement on. It’s an incredibly high risk prospect. But the potential rewards are just as great.
You can find out more about Sam and Ryan’s crypto recommendations in their introductory crypto investment service, Secret Crypto Network. Details here.
This week in Money Morning
In Monday’s Money Morning Ryan discusses the possibility of a market crash of 50% by 2019. According to Ryan, we’re in an ‘everything bubble’. Which means property, stocks, everything is a bubble.
Since the global financial crisis, interest rates have stayed low and house prices have continued to rise. And thus many western countries are facing debts they’ve never seen before. Central banks are now determined to wind back this process. Will that mean correction, or crash? To read more about this predicted market fall, go here.
Wages continue to stall in Australia. And we are starting to see the generational shift. Millennials are struggling to come up with the funds to own their own home. However, it seems that baby boomers, millennials’ parents, are beginning to retire in droves. The ‘great Australian dream’ may seem out of reach for millennials, with Ryan believing that the numbers show an evolution of work-place upon us. With a shift in numbers in the workforce favouring millennials, we may even see the end of negative gearing.
Ryan started off talking about wage growth, but he doesn’t see that happening anytime soon. Instead, he expects something else that’s beneficial to all: tax cuts. To find out more, go here.
As the bloodbath in bitcoin continued, one crypto actually rose this week. Could this rival be a new contender for the ‘king of the cryptos’? Bitcoin has always been foremost in the general public’s mind, largely because it burst onto the scene first. But perhaps it’s time for other, more useful cryptos to step out of bitcoin’s long shadow. Read the details here.
Then on Thursday Ryan took aim at President Trump’s plan to save the US economy. How will the largest economy in the world be turned around? Why with more debt, of course!
Stocks have certainly seen a short-term boost from Trump’s tax cuts and stimulus promises. Can it last? Who cares? Let’s make hay while the sun shines! At least, that seems to be the attitude. Long term, it all seems to be headed straight for a cliff at high speed. But Ryan’s recommendation for you might surprise. Click here to read more.
Your Friday article this week looked at how ‘sophisticated’ investors get an incredible advantage in stock markets. One that they’ve long used to buy at better prices than the rest of us. And, often, to sell to retail investors for huge profits, right at the top of a bubble. Only to escape unharmed as it all falls apart shortly after. But this early advantage doesn’t always apply. There’s one boom where the sophisticated investors missed out. And as Ryan explains, their loss could be your gain. Read on here.
Editor, Money Weekend