Dark clouds have hovered over the cryptocurrency universe for most of this year. Having risen to record highs in the last few weeks of last year, it was widely expected that cryptocurrencies would maintain their market values and even rise higher. Many analysts went on TV shows and predicted that Bitcoin’s price would approach $50,000 by the end of the first quarter, and the market supported those predictions.
Anything But Rosy
However, the market has been anything but rosy for cryptos since the year began. For the last three months, Bitcoin has been battling to stay above $7,000, and the other cryptos haven’t done well either. The worst performer has probably been Ripple’s XRP which has slumped more than 75% since hitting its record high in January. Ethereum has hit its lowest price since November, with Litecoin, Stellar, NEO, IOTA, Cardano, EOS and most of the other major cryptos bleeding greatly. However, the recovery has already begun and things are looking up, with Bitcoin approaching $9,000 at press time.
The recent slump was brought about by a number of factors that involve the hard questions which the market avoided addressing last year. The first of these concerns are regulatory, with governments across the world clamping down on any cryptocurrency whose practices they deem ‘fishy’. The clamping down was especially directed at crypto exchanges, and Japan is leading this crackdown on exchanges. One of the most crypto-friendly nations, it has insisted on a strict regulatory policy in regards to exchanges, especially since the hacking of Coincheck. This has led to the closure of exchanges in Japan including Tokyo Gateway and Mr. Exchange. Binance is also relocating to Malta after failing to get the required license from the FSA.
Another major factor has been the banning of cryptocurrency ads from the leading digital ad providers this year. The bans began with Facebook, which announced in January that it would ban crypto ads to protect its users from fraudulent ICOs that were on an alarming increase. The effect on the markets was immediate, and most cryptos dropped in value (though later regained it). Google was next, and the reasons were similar. Twitter and MailChimp are some of the other digital platforms that have clamped down on crypto ads. While crypto ads being banned should not have had such a huge effect on the markets, the reality is that it did. These bans made people ask tough questions and also made others cautious about investing in crypto.
It Only Gets Better
The huge slump has given many investors the jitters, especially those who invested for purely speculative reasons. However, this was a necessity for the long-term success of cryptocurrencies. The cryptocurrency market has become rife with scams, frauds and dishonest people who are out to prey on the ignorance of others.
In the year 2017, ICOs raised over $4 billion, a very impressive figure given that ICOs were a largely unknown concept the year before. Sadly, ICOs also became a favorite channel for scammers. Cryptocurrency projects that promised assured profits were on the rise, and many unsuspecting investors put their hard-earned money into these projects only for them to be closed down a few months later. With the ICO sector being largely unregulated, there was no way for the investors to recover their money, and millions of dollars were lost. Those platforms included AriseBank, Confido, Bitconnect, MyBTGWallet, Bitcard, ToTheMoon, and many more. This brought a bad reputation to crypto, even though many were solving real problems and doing so in an honest way.
Regulation will go a long way in curbing fraudulent projects in the ICO sector. These policies will also prevent the loss of funds due to additional hacks. Hundreds of millions of dollars have been lost to hackers, and this will continue if the exchanges are not forced to take more stringent security measures. Japan is leading the world in enforcing security compliance, which in the long run will only inspire more confidence in the sector.
The bans by major digital platforms of all crypto-related ads were taken as a gesture of war by many crypto enthusiasts. This may be so, but there is no denying the bad reputation that cryptocurrencies were getting from fraudulent ads that used these platforms to target novice investors who had no way of telling the good from the bad. The bans halted such projects. Most of the platforms, including Facebook and Google, have promised to continue working on bettering their systems to be able to differentiate the genuine projects from the fraudulent ones, and in the future, these ads could be brought back in a regulated manner.
The cryptocurrency universe may be down for now, but it is most certainly not out. It has become better, more streamlined, and is gradually weeding out the toxic elements. It only gets better from here.