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Bitcoin bears brunt of regulation

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Amid fears of a regulatory crackdown by China and South Korea, Bitcoin hit its lowest since early December dropping to US$10,065. The world’s biggest (and most proclaimed) cryptocurrency also impacted other prominent rivals including Ripple and Ethereum. Bloomberg reports that their collective plunge has ‘knocked off an estimated US$300 billion in market value from the cryptomarket’.

Just to put things into perspective, Bitcoin saw a staggering gain of 1400% last year surpassing US$19,000 in December. Ever since its meteoric rise, investors and market analysts have questioned its stability and longevity especially due to the lack of regulation. Some argued that it was only a matter of time before government intervention would burst the bubble, while others were convinced of its widespread acceptance.

Although Bitcoin has been the most popular amongst cryptocurrencies, 2017 saw several alternative options hit the market.

Experts speculate that this steep drop in price might displace Bitcoin as an early leader in the cryptocurrency space with investors moving onto smaller, less volatile substitutes.

Speaking exclusively to SME Advisor, Alexey Sokolin, Global Director Fintech Strategy & Partner, Autonomous Research, said: “Volatility is a built-in feature of the crypto economy right now for several reasons. First, while the market has grown tremendously in 2017, it is still small for large institutional money and crypto whales, who can affect price with regular large transactions or coordinated selling. Second, there is inherent leverage in the prices today, which assume as if all the experiments technology is built and functional and thus pricing new tokens in the billions of market cap. News affecting those perceptions will have an outsized effect on price since sentiment is the primary driver of the market. Finally, in context of the last six months, the public crypto world is still massively valued and this is a small place correction. Even if prices continue to fall, the underlying progress in decentralized open source technology will continue.”

All in all, the crypto frenzy continues and the hype surrounding it shows no signs of slowing down. Will rising regulation upsurge the future of digital currencies? We’ll have to wait and watch.

Rushika Bhatia

Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of SME Advisor magazine - the flagship title of CPI Business. She is passionate about infographics – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.