Cryptocurrencies are very fascinating. It has been a hot topic of discussion since last year. Bitcoin surged around 2000% in a single year. It gained the attention of a vast audience in December last year. However, beginning of this year doesn’t look that good. Rather it is repulsive.
Nearly one-fourth of the total market value of cryptocurrencies generated in 2017 was erased in a single month. January recorded $44 billion of total loss in Bitcoin and altcoins, making it the most significant single-month loss in the recent history of financial markets. Most of the steep declines in the month were triggered by government actions, particularly in Asia.
Since the introduction of Bitcoin, future contracts pumped Bitcoin price to reach $20,000 in mid-December, financial regulators around the world have been nervously watching the digital currency space, eager to figure out its impact on the traditional financial system. Several countries introduced concrete regulations to tame the investor mania. They also formed forces to combat high-profile criminal activities involving digital currency.
Cryptocurrencies started the new year with an impressive ‘over USD 600 bn’ market capitalisation. In the beginning, things were going great. Market cap even crossed a whopping USD 800 bn mark. However, later, it fell hard, harder than the investors could bear. The market capitalisation went below USD 450 bn on Jan 17. With several ups and downs, the market closed around USD 500 bn. Bitcoin was trading over USD 14,000 at the beginning. It crossed USD 20,000 price recording an all-time high value. However, it crashed too and ended around USD 10,000.
What are the events responsible for the fall?
Below are some of the most notable government actions, major security breaches and other reasons involving digital currency that contributed to the avalanche of the cryptocurrency market in January:
China Cracked Down on Crypto Ponzi Schemes
China was already an early mover in cryptocurrency regulation, leaving limited space for high-volume traders to disrupt the financial market within country borders. And yet, in light of the OneCoin incident, China’s public security ministry announced a plan on January 19 to crack down on domestic Ponzi schemes. The government also raided many cryptocurrency exchanges in the country.
Hackers attacked Japan’s Largest Crypto Exchange
Japan’s largest exchange, CoinCheck was hacked. As confirmed by president Wakata Koichi Yoshihiro and chief operating officer Yusuke Otsuka, CoinCheck lost about $534 million making it one of the biggest hacks ever on an exchange. 500 Million NEM Tokens are said to have been stolen from its wallets.
In reaction, Japan’s Financial Services Agency publicly urged for increased regulations and ordered the exchange to investigate the incident and submit a written report by February 13 with plans to prevent recurrence.
South Korea Banned Anonymous Accounts on Crypto Exchanges
South Korea announced plans to require local banks to launch a real-name system for cryptocurrency trading that will need the up-to-now anonymous transactions be traceable as the country seeks to curb speculation and criminal activities. Also, country’s financial regulator announced a ban on the use of anonymous bank accounts in cryptocurrency trading from Jan. 30.
Justice Ministry of South Korea announced a proposed ban
Park Sang-ki, South Korea’s Justice Minister, at a press conference said that government was planning a ban cryptocurrency. He quoted – “There are great concerns regarding virtual currencies, and justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”
However, later, the Blue House denied any intention to put any ban in the short term. But the damage was done by that time, and it was severe.
U.S. SEC Cracks Down on ICO Fraud
On January 30, the U.S. Securities and Exchange Commission (SEC) obtained a court order to halt an initial coin offering of a Dallas-based banking platform called AriseBank. The company aimed to raise $1 billion from retail investors. If completed, it would have been the largest ICO to date.
CoinMarketCap excluded some of the Korean exchanges in price calculations
CoinMarketCap unlisted prices of some of the major Korean exchanges. Since the trading prices of most virtual currencies are much higher on South Korean exchanges like Bithumb, CoinOne and Korbit-reportedly up to 30% higher due to high local demand-compared to other countries, CoinMarketCap’s revised prices showed a sharp, sudden drop. This created havoc amongst the investors.