There is no end in sight for the cryptocurrency bloodbath that has drowned the market in red for a number of weeks, continuing the post December 2017 sell-off. A market once worth over $800 billion USD is now worth under $300 billion. That downward plunge has been largely continuous, with the only respite coming in late April. Without a Chinese New Year dip to blame, as in previous years, what has happened?
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It’s a Bloodbath! Crypto Market Bludgeoned
Of the top 100 coins by market cap at press time, only nine are in the green over the past 24 hours. It is a fool’s game to try to explain the ebbs and flows of the wild dynamism that defines, and always has defined, the cryptocurrency market. However, there are a number of factors that may help explain why the late April resurgence proved so short-lived.
EOS, Verge, and a World of Pain
The sildenafil-fueled EOS bubble that saw it rise to fifth in market cap — doubling its price in April before halving it by press time — has deflated. As it approached its mainnet launch, Chinese Internet Security firm 360 reported that the technology suffered from “a series of epic vulnerabilities”.
Those revelations followed consecutive 51 percent attacks on high-profile coin Verge, from early April and to after its tie-up with pornhub.com at the end of May. Litecoin’s failure to launch the much-anticipated payments gateway LitePay — announced March 26th — and Twitter’s crypto ad ban set to commence the following day, proved mere appetizers for the technical, organizational, and publicity failings of the industry. Bad news was everywhere.
Like everyone else, we got too excited about something that was too good to be true and we optimistically overlooked many of the warning signs. I am sorry for having hyped up this company and vow to do better due diligence in the future. https://t.co/khIjeHnyZ1
— Charlie Lee [LTC] (@SatoshiLite) March 26, 2018
Regulators Get Busy
If cryptocurrency foundations weren’t proving incompetent enough to cause themselves problems, regulatory bodies were starting to apply heat. Kraken, Coinbase, Bitstamp, and itBit found themselves at the center of a Commodity Futures Trading Commission (CFTC) probe into market manipulation. The investigation was initiated in response to the exchanges’ refusal to hand over trading data that had been requested by the CME Group.
The CFTC investigations, reported early June, followed two significant regulatory actions in late May. First, it was revealed that up to 70 coordinated investigations into ICOs had been underway among securities regulators in North America in the so-called Operation Cryptosweep. Reported around the same time, the U.S. Department of Justice had begun an investigation into price manipulation in crypto markets.
Let’s Not Forget… Exchanges Can Be Incompetent Too
May also witnessed a raid by authorities of popular Korean exchange Upbit over suspicions of fraud. Upbit is owned by the KaKao Group. Another Korean exchange, Coinrail, was hacked only a few days ago. Although a minor exchange, the incident was yet another reminder to crypto enthusiasts that their money is not safe on exchanges that seem to insist on negligence and ineptitude.
When You’ve Only Got a Nail, All You See Is a Coffin
Announced mid-May, Bing decided to join Google, Facebook, and Twitter in banning crypto ads, although that is unlikely to significantly dampen public awareness of cryptocurrencies given Bing accounts for less than 4 percent of internet search queries worldwide.
Possibly the most frightening undercurrent in cryptocurrency is the lingering discomfort over Bitfinex and the issuance of tethers (USDT). Bitfinex has always claimed each tether is backed by USD fiat one-to-one, but refuses to cooperate with auditors. Certainly, the charts of USDT supply do not resemble normal market patterns.
As revealed in an excellent report by William M. Peaster yesterday, a paper written by researchers at the Austin campus of the University of Texas argues that tether was used in 2017 to support and manipulate bitcoin prices, which skyrocketed at the end of last year.
If the cryptocurrency scene is to implode on itself, Bitfinex and tether have become to today’s market what Mt. Gox was in 2014: the potential last nail in the coffin of a genius idea destroyed at the hands of human greed and maladroitness.
Whether the sum of all these parts proves sufficient to render cryptocurrencies futile and positioned to expire worthless remains to be seen. What crypto advocates are sure of, however, is that 2018 has ushered in a bloodbath in the market the stains of which may take some time to wash away.
Have your say. Is the crypto bloodbath going to be short-lived? Are you losing hope in the future of cryptocurrency?
Images via Pixabay