Until 2015, cryptocurrency investors were extremely positive about the revolutionary currency. But today, some of them would agree that the crypto boom has proved to be more like the Internet-stock boom. Not just Bitcoin investors but even people who have invested in others like litecoin, ripple, and ethereum, etc. had a reality check in November. Let’s look at some of the reasons behind the cryptocurrency crash.
Failure in upgrading with time
During November alone, Bitcoin lost around 17 percent of its value. The cryptocurrency has survived several crashes since December 2016. However, this time, analysts believe the crypto market might soon experience jeopardy. In November, the most preferred cryptocurrency touched its lowest mark of $3,640 and triggered panic amongst the young investors.
Weiss Ratings chief Martin Weiss interacted with journalists and shared his opinion on the issue. He pointed out that the Bitcoin has experienced several periods of turbulence during the last eight years. It had lost 70 percent of its value at four different occasions and yet managed to recover in a few months. Weiss stressed on the point that people might suggest crypto fever is over, but Bitcoin has managed to climb 6,300 percent back from its lowest peak at times. He also believes that after losing as much as 70 percent of its value, Bitcoin would once again start gaining its value back in 2019.
However, Weiss raised his concern about Bitcoin’s failure in upgrading Distributed Ledger Technology (DLT). The market prefers scalable, faster digital currencies. Adapting innovation is essential for price appreciation.
Data security firm Netskope’s associate Paolo Passeri also shared his opinion on the issue and said the crash has led to an increase in cybercrime activity.
The crash in crypto prices and the rise in power costs around the world have made cryptocurrency mining less viable. So, cybercriminals are finding new ways to hack wallets and other systems that handle the digital currency transactions.
SEC’s ICO ruling
The U.S. Securities and Exchange Commission classified ICO (Initial coin offerings) as unlicensed securities and even acted against two companies in November. Currency developers who launch ICO in the US are liable to significant fines. This action has not gone down well in digital currency investors and even triggered panic.
The SEC was often criticized until now for not doing enough and enforcing the regulation. It was a long overdue intervention according to experts.
Uncertain regulation in many countries and drop in most of the cryptocurrencies value has forced people to question the viability of the trade. Investors are spooked as of now and would probably wait and watch until proper regulations are issued by the US and other governments around the world.
Another aspect worth focusing is the ban on crypto transactions implemented by several central banks. In the Asian giant, India, the regulators seized country’s first Bitcoin ATM within ten days after its launch. The machine was installed to help consumers buy and sell digital currencies using local money and cards.
Countries like Canada, China, India, and Sweden have tagged cryptocurrencies as unsafe products. These nations are also exploring the possibilities of launching their own digital currencies powered by blockchain technology. Even Christine Lagarde, the IMF chief urged countries to develop their own blockchain based digital currencies that can be moderated by central banks.
Reduced demand for hardware used in crypto mining
Cryptocurrency miners use expensive systems consisting of chips made by Advanced Micro Devices and Nvidia for the digital currency mining. Both the companies have lost their value during the last few months due to declining sales. It indicates that people’s interest in crypto mining has reduced considerably. This factor suggests that miners somehow predicted the possibility of a crash and reduced mining activity. The latter’s stock reached its 16 month low mark after revealing details about a decline in sales. Experts believe there is indeed a link between the decrease in the concerned hardware sales and crypto crash. Now, investors are questioning themselves about the long-term benefits of investing in digital currency.
The divide between Bitcoin Cash SV and Bitcoin Cash ABC
Crypto market experienced a lot of unrest recently due to the Bitcoin split. The two coins are referred to as Bitcoin Cash ABC and Bitcoin Cash SV. This has triggered a lot of confusion among investors.
Wealth management platform TrustVerse’s CEO Michael Jeoung interacted with journalists and shared his observation on the split. He believes the division in the currency is the prominent reason behind the overall market’s melt-down. The money is supposed to be decentralized with the help of blockchain, but the split has made it monopolized and centralized according to Jeoung. The separation has put a question mark on the digital currency’s functioning ethics.
The Bitcoin was introduced as something that would promote a shared economy, shareability. But the split has proved the possibility of manipulation and triggered mistrust. The split-has exposed that the product has served some people’s self-interest rather than the public’s interest according to the wealth management expert.
Non-tech-savvy investors were already confused due to complicacy in transactions. The split and downfall in value have spooked them even more. Perhaps, this is the reason cryptocurrency transactions have slowed down since the last few months.
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Excess hype caused a lot of damage
Trading platform ‘London for Markets.com’ analyst Neil Wilson believes crypto was a speculative bubble. The hype portrayed as if Bitcoins would replace gold and reshape everything from food to finance. However, today, investors have started panicking due to slower adoption, the absence of tighter regulations, the possibility of market manipulation, and security flaws.
Barring a few tech companies and fast-food chains, organizations from around the world have not shown the necessary willingness in accepting cryptocurrencies for transactions.
Attempt to promote cryptocurrencies in the name of promoting blockchain technology
No doubt, blockchain technology has excellent potential. The banking sector and health-care industry have already started using the same in a variety of applications. However, crypto supporters often try to promote cryptocurrency investment by suggesting the technology has a bright future, and so does the currency that is transacted using the same tech. People slowly realize the importance of blockchain, but they are rejecting the digital money.