The ‘sales wave’ of cryptocurrency's is not limited to January. The ten major cryptocoins further decrease in value in the past 24 hours, bitcoin is worth even less than $ 8,000. The price of the most important crypto coin is around $ 7560 at the time of writing, according to indexing page Coinmarketcap.
The bitcoin is thus again worth the same as before the peak in December, when the price was above $ 20,000. It's from November ago that the price was so low.
Fear of sales wave
The reason for the big losses is not entirely clear, although I understand what has put everything in motion, with the rumors about regulation and the uncertainty surrounding tether. A little more explanation about this:
The American stock exchange supervisor CFTC has investigated the cryptocoin tether and the largest crypto exchange in the world, Bitfinex. The news created great uncertainty among investors. This uncertainty can be justified in a certain sense, because according to CoinMarketCap, Bitfinex is the largest trading platform for bitcoin. Tether (Bitfinex held the majority stake in Tether), is number 22 on the list of most valuable crypto coins.
The fact that this company is being investigated by the American regulator creates serious doubts. That is because the price of tether is linked to the dollar. The company, which is managed by the same person as Bitfinex, claims that it has a dollar in cash for every tether on the market. This makes tether a so-called stablecoin, a stabilizing factor in the strongly fluctuating crypto market. Investors know: if I want to get out, I get a dollar back for every tether I have.
Doubts about reserves
According to news agency Bloomberg, the companies already have been summoned by the Commodity Futures Trading Commission in December to provide evidence of the financial reserves. Question: Does the company have $ 2.2 billion in cash, the current value of the tether?
According to the two companies, it is a routine investigation, which they normally never say anything about to the media. This for the simple reason that they receive regular requests from authorities who do research.
We routinely receive legal process from law enforcement agents and regulators conducting investigations ... It is our policy not to comment on any such requests.
If that link proves to be fraud, the price will fall hard. Fraud is possible, because rumors about tether have been circulating for some time. According to some bloggers from the crypto world, massive tethers were created without a corresponding dollar reserve. The money would then have been used to boost the prices of bitcoin and other known crypto coins.
In addition, you have another story. The authorities in South Korea have discovered that at least € 480 million of criminal transactions have been done with cryptocurrencies (Reuters). The South Korean customs suspect that investors in South Korea have invested in cryptocurrencies, and then send it abroad via wallets to their accomplices. They could then easily convert it into dollars or euros.
Psyche of investors
But the underlying reason for the price losses is, in my opinion, that investors seem to be looking for certainty. People were euphoric when it went up, now they think: just take your profits now that it is still possible. This way of thinking creates a ‘pull factor’.
All those negative news items and the subsequent falling prices affect the psyche of investors. And that often plays a big role with less experienced investors. Crypto land is a major psychological challenge, people become agitated, while it is sometimes smarter to sit quietly and relax.
In addition, it is difficult to give traditional investment advice. It would be normal, if you invest for the long term, that you do not sell when the price fluctuates. But with cryptocurrencies, everything is different. We actually have no idea what will happen…
Bitcoin is the trend setter, and so many months going up, it was bound to happen. With the hype many newcomers got in the game without the knowledge and the stress management skills, and they behave by impulse instead of getting to know the waters before.
So far, Cryptoland is speculation land, but soon or later, the market will become a little more predictable and the investors, more educated. In the meantime... be water!
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