Cryptocurrencies are rapidly losing value as governments the world over are cracking down on mining, purchases and exchanges.
Bitcoin has lost nearly half of its value, tumbling from over $20,000 to less than $12,000. Ethereum, Ripple, Litecoin and other well-known cryptocurrencies also fell as investors worry about countries creating new regulations affecting cryptocurrencies or even banning them outright for any one of a number of reasons. While some confidently proclaim that no government would outlaw cryptocurrencies outright but instead only seek to regulate their use, the truth is that the rise of cryptocurrencies is unprecedented, and so the response to them may be so as well.
China mines more Bitcoin than any other country on Earth; however, that does not mean that it is a favorable environment for Bitcoin or any other type of cryptocurrency. The Chinese government is already calling for an orderly exit from the cryptocurrency, and putting plans in place to limit the amount of electricity Bitcoin mining operations can use. The government is also targeting mobile apps and websites used to trade the cryptocurrency, making it hard for investors to buy and sell on these platforms.
India’s government has taken matters one step further by openly declaring that Bitcoin and other cryptocurrencies are not legal tender, and banks in the nation are making it very difficult for coin exchange companies to provide timely deposit and withdrawal services to its clients. Even South Korea seems to be turning against cryptocurrencies as it considers an outright ban on cryptocurrency use.
Asian countries aren’t the only nations that want to make life difficult for cryptocurrency companies and investors. France’s finance minister is working to draft tough new rules that could foreshadow an eventual cryptocurrency ban. Russia is in the process of setting forth legislation that would regulate cryptocurrencies and prohibit mining; however, the laws would still allow investors to buy, sell and trade these currencies online. Brazil has made it illegal for local investment funds to buy cryptocurrencies; furthermore, the government does not consider these currencies to be financial assets. Even the United States is taking a stand against initial coin offerings.
At the same time, central banks are using their influence to devalue cryptocurrencies on an international scale. Germany’s Bundesbank has stated that local laws restricting cryptocurrency mining, trading and other activities aren’t enough and is calling for global regulation on cryptocurrencies. Other central banks are deriding cryptocurrencies as a poor investment knowing full well that their words will lead to a drop in cryptocurrency values.
While these bankers and world governments openly decry the fact that cryptocurrencies are often used for shady purposes such as tax evasion, money laundering and illegal purchases, the real reason for government and banker hostility to cryptocurrencies stems from the fact that these currencies are beyond their control.
Some would say that the current state of affairs makes it clear that it is time for investors to get out of the cryptocurrency market. Financial experts have been warning for a long time that the market is a bubble that will one day pop. However, it does not seem that cryptocurrencies are completely losing their value, even though the news surrounding them has been completely negative for the last few days.
A number of investors are taking advantage of the fact that cryptocurrencies are not worth as much as they were at the beginning of the year and are buying the dip with the full expectation that values will rise in the near future. A number of businesses still accept Bitcoin as legal tender and will likely continue to do so for the foreseeable future.
The cryptocurrency market has been volatile from the onset. It is truly uncharted territory as it represents the first time in recent history that money has been created by an entity other than a central bank or local government. Investors who are wary of placing their faith in traditional currencies and investments are flocking to cryptocurrencies and the anonymity they have to offer.
While governments and/or banks may very well take action against the cryptocurrency market, the chances of completely obliterating it at this point are pretty slim. Like many online ventures, it cannot be controlled by a single nation and cryptocurrencies and investors alike are likely to find ways to get around regulations on what can and cannot be done with cryptocurrency investments.
Regards,
Ethan Warrick
Editor
Wealth Authority
