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Crypto Markets Hang On Through Tsunami of Negativity

By February 11, 2018 No Comments

Don't Believe The Hype    

The mainstream media loves to confuse the public about cryptocurrency, and even the most highly respected sources for financial news can succumb to the temptation to engage in hyperbole.  Every smart investor should do their own research, but the sad fact is that very few people actually do.  Instead they react hastily, motivated by panic and greed.

When CNBC first reported Korean regulatory talks on cryptocurrency on January 10th, the headline read "one of the world's biggest cryptocurrency markets considers a bill to ban trading"

Investors were most likely reminded of last year's Chinese ICO ban and subsequent crackdown on crypto exchanges which put significant downward pressure on crypto markets, so that headline alone was enough to set off a wave of panic-selling, and the tsunami of negativity was set in motion.

It later turned out that South Korea was merely trying to rein in anonymous crypto transactions and the actual regulations, when implemented, were far from draconian.  But no matter, the markets were sufficiently spooked to overreact to more negative news when it came - and it came fast.

Coincheck gets REKT for half-a-billion dollars - the biggest heist, virtual or physical, in history.

Coincheck gets REKT for half-a-billion dollars - the biggest heist, virtual or physical, in history.

High Alert

January 16th brought the headline "Cryptocurrency Market on High Alert as CFTC Subpoenas Tether, Bitfinex".  The investigation was prompted by rumors that the stablecoin Tether was only fractionally backed by US dollars and the minting of tether by the Bitfinex exchange was a deliberate effort to manipulate cryptocurrency prices and cover up Bitfinex's financial issues.

A detailed statistical analysis, published later, on February 6th, found no evidence of market manipulation, stating "... the correlation in all cases is still close to zero and testing does not support the claims that BTC prices are moved by USDT printing."  But again the damage had been done and crypto markets continued to plummet.

Bitcoin's Woes Magnified

On January 24th, the massive payment processor Stripe withdrew support for bitcoin, and their statement as to why was a litany of bitcoin's woes that panicky investors did not seem pleased to be reminded of: it's too slow, too expensive, and too volatile to be a medium of exchange for micro-payments.  The selloff continued, and hackers were about to deal crypto another massive blow.

Can somebody throw crypto a frikkin bone here?  For more than 30 days the the relentlessly painful negative news just kept on coming.

Can somebody throw crypto a frikkin bone here? For more than 30 d​​ays the the relentlessly painful negative news just kept on coming.

The Biggest Heist ..... Ever

Not just in hacking, or in cryptocurrency, but the biggest heist in history was pulled off when in the early morning of January 26th hackers stole, in a single transaction, all the NEM coin held on the Japanese exchange Coincheck.

The value of the XEM stolen was estimated at more than half-a-billion dollars, and ironically, although the coins could be tracked by investigators through the blockchain, they were unable to retrieve customers' coins.  Lax security measure were likely to blame, and the exchange promptly offered to compensate the affected investors.

Facebook Piles On

As if there wasn't enough negative crypto-news to go around, on January 30th Facebook issued an outright ban on all cryptocurrency and ICO-related advertising, stating in its official policy "Ads must not promote financial products and services that are frequently associated with misleading or deceptive promotional practices..."

3 days later, Reuters reported that Lloyd's Banking group, Britain's largest, instituted a ban on cryptocurrency purchases with its credit cards.  Several other major British credit card issuers followed suit.

Surviving The Tsunami of Negativity

Despite the seemingly relentless barrage of dire verbiage, the crypto market seems to have survived pretty much intact.  When the dust finally settled on the carnage, cryptocurrencies across the board had lost between 50 and 70% of their value.  For cryptocurrency markets this falls into the "critical but not serious" category.

Will the next crypto-boom come from D.C.?

Will the next crypto-boom come from D.C.?

Now It Gets Weird

The nascent crypto-recovery, depicted in the yellow circle at the bottom right of the chart above, seems to be coming from the most unlikely of places - the Feds in D.C.

Crypto-Boom

The last crypto-boom came from Wall Street.  A two-hour senate hearing with the chairmen of the CFTC and SEC suggests the next one might actually come from D.C.

Instead of dismissing crypto out-of-hand, or relegating it to the shadowy corners of the dark web, regulators seem to actually be educating themselves about cryptocurrency and taking a balanced approach.

Obtuse Mischaracterizations

This is in stark contrast to the typical obtuse mischaracterizations we have become accustomed to hearing from conventional financial big-wigs, like this ridiculous statement from the general manager of the Bank for International Settlements (BIS), Agustin Carstens, who referred to bitcoin as "mega-sodukus".

This is the best news cryptocurrency has seen in a long time - regulators are starting to recognize the enormous value of the emergent properties of cryptocurrency that we've never seen before:  undisputably verifiable digital ownership, digital scarcity, and the fusion of medium and method of exchange into a single self-sustaining entity.


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