No one would have thought 7-8 years ago that cryptocurrencies will become the talk of the town. People now prefer to invest in cryptocurrencies rather than investing in stocks, gold, or any other commodity. However, one problem that the investors are going through it’s the volatile nature of the cryptocurrencies. Cryptocurrency downfall has been a significant problem in the recent past, with some analysts believing that this could continue in the future as well.
Cryptocurrency Downfall: Regulatory Issues
However, the question is why are cryptocurrencies witnessing a downfall? Not only Bitcoin, the most popular cryptocurrency, but all other cryptocurrencies saw a significant drop in their values during the months of December and January. Bitcoin was the one that suffered the most during this downfall stream as its value went down by more than 60% to less than $7,000 before making a slow recovery and standing at $11,000 as of now.
The one primary reason for the downfall of cryptocurrencies has been due to the regulatory compliances enforced by different countries. Before getting popular, all cryptocurrencies were going unnoticed with no regulatory authorities taking any action towards it. However, now the cryptocurrency market is worth billions of dollars, and the industry and regulatory watchdogs are keeping a persistent check on it. Countries like South Korea, India, and others are now adding regulations to cryptocurrencies trading to keep a check on it.
Regulators are now cracking down on any unlawful uses of cryptocurrencies to cut down the financing of any illegal activities. Before South Korea began its crackdown on cryptocurrency, the entire country was becoming a trading hub for cryptocurrency with students, homemakers, and almost every other individual was involved in heavy cryptocurrency trading.
Cryptocurrency Downfall: Withdrawals from Exchanges
Another primary reason for the downfall of the prices of cryptocurrencies is due to the unexpected halting of withdrawals of cryptocurrency exchanges. A Tokyo based crypto exchange halted all withdrawals from its exchange after a hack led to a loss of more than $500 million in January 2018. This halting of withdrawals of cryptocurrencies also results in the cryptocurrency downfall. This is because this type of news creates panic in the market and new investors head straight to cash out their investments because of fear.
Cryptocurrency Downfall: No Backing Up
Another problem that many investors have to face while investing in cryptocurrencies is that this particular investment is virtual and not backed by anything. Whether it’s the bitcoin or Ethereum or Litecoin, none of these currencies supported by anything. The prices of all the cryptocurrencies depend on the demand and supply factor, or you can say that it depends on the universal belief value that people perceive of cryptocurrencies.
Outcome after Cryptocurrency Downfall
With everything in the air and nothing in hand, cryptocurrencies turn out to be a massive gamble for people who go for safe investments. Thus whenever the crypto market is volatile, these safe investors get a panic attack and look out for ways to cash out and get out of the cryptocurrency downfall. But not every time you can get away with this.
The recent cryptocurrency downfall wiped off more than $100 billion from the crypto market in what termed as the biggest as the most significant loss in the history of digital financial assets. However, some investors are still optimistic about cryptocurrencies. These investors believe that the crypto market has always been like that but is now getting more attention only because it has grown on to a significant level. However, that is the real flavor of the crypto market, and you have to deal with it to stay alive.
Get smarter with training courses to stay ahead of the digital trends in the evolving market.