Cryptocurrencies take a huge hit Fraud and tightened regulation have been cited as the main causes for the plunging experienced by Bitcoin in the last week. The value of Bitcoin dropped by 50% from the historic peak it attained in 2017. Other major cryptocurrencies such as Ethereum, Litecoin and Ripple have also taken a beating, dropping by double-digits in comparison to their peaks last year.
The cryptocurrency space was also hit by a huge storm when BitConnect collapsed on Tuesday. This crypto exchange which was operated anonymously had received repeated accusations of running a Ponzi scheme using its native cryptocurrency, BCC. Tougher regulations The cryptocurrency market is very volatile, as these events in the recent past have reminded us. The market is unpredictable and it can change overnight.
Bitcoin, for instance, has had to weather multiple crashes, such as in the spring of 2011 and in November 2013 but recovered to peak at $19,783 on 17th December. The current bubble is significantly different because it is on the backdrop of globally enforced regulations against the fickle and unpredictable cryptocurrency market. These regulations are scaring many potential investors who are worried about the impact they will have once enforced. Nevertheless, they have been critical in unraveling key issues in suspect exchanges such as BitConnect.
Between December 17th and January 5th, its token declined by 46%, leading to the closure one day later. In the United States, the SEC has been the force behind the enforcement of these new laws. They pressed charges officially for the first time against PlexCorps, through its newly formed Cyber Unit.
PlexCorps is being accused of defrauding their investors through a questionable initial coin offering. Jay Claytonissueda, the SEC chairman gave a stern warning on cryptocurrency to investors. He hinted that the SEC would begin monitoring the more keenly so they can check for any violations of security laws. The US has not been the country that has had the desire to put in place regulations enabling them to monitor the market more closely.
The Chinese government tightened its regulations on cryptocurrency trading in the past week, with the Korean government expected to follow suit in no time. Harsher regulations all around the world have been cited as the biggest cause of the great fall in value experienced by almost all cryptocurrencies.
They are also cited as the major reason for the collapse of BitConnect. BitConnect eventually had to close shop after several cease and desist letters from the securities watchdogs in Texas and North Carolina.
Pump and dump
The current Bitcoin bubble has been attributed to the historic lack of properly structured regulations. This has left the market vulnerable to manipulation and erratic trading practices. According to the findings of an investigation by Business Insider, pump and dump scams where individuals and entities artificially inflate the price of a cryptocurrency by carrying out mass buying were quite popular on Bittrex, a US exchange.
The biggest exchange, Bitfinex, also admitted to having made discoveries of market manipulation in August, where many accounts were engaging in large scale to drive its prices up, especially that of Bitcoin. The accusations of market manipulation are not where it stops, with Bitfinex being accused of having developed Tether. Tether is a cryptocurrency that is pegged to the US dollar.
These and many more illegal practices are being made possible by the lack of regulation in the market. With regulatory authorities finally meant to intervene, the market will become safer and easier to work in, The SEC and FINRA are just a few of the regulatory authorities that are expected to bring order and sanity into the cryptocurrency space.
The recent falls in the prices of most cryptocurrencies has been spectacular owing to the fact that these currencies were spurred on to record values through market manipulation.
The new regulations are however a silver lining and are expected to enable these currencies to recover. By clamping down on the fraudulent means that most cryptocurrencies used, it will take longer for these currencies to get back to their dizzying heights. The people who made ill gains will have to sell their gains, which will open the eyes of many to finally see that the cryptocurrency space is one full of dubious activities.
