Investing in cryptocurrencies can be a bit tricky. For government officials, it can also be a cause for alarm. This digital asset is extremely volatile and can make you rich or poor in no time depending on the different factors involved.
However, after recent news that South Korea and China are imposing strict regulations on digital currencies, almost all digital currencies took a dive with Bitcoin dipping as low as $9,199.59. However, by Thursday at 12:00 pm Eastern Time, digital currencies bounced back. Bitcoin was able to break the $12,000 level and was even able to hit $12,045.10 by around 10:14 am.
And Bitcoin wasn’t the only one that was able to recover. In the past days, Ethereum hit below the $800 mark. In fact, the digital currency even dipped at $780.92 at one point before bouncing back to $1,072.57 by Thursday.
Ripple also experienced a spike of 65% hitting $1.64 according to CoinMarketCap. Ripple on Wednesday dipped as low as 90 cents. This digital currency has been getting attention lately due to the interest of big banks to this cryptocurrency.
Spooked by Regulations?
South Korea has been one of the largest markets for the cryptocurrency world not only in Asia but worldwide. And over the last few weeks, South Korea has been reported to have plans of shutting trading via its digital currency exchanges. On Thursday, policymakers mentioned that they are considering to shut down domestic digital currency exchanges. With Chinese regulators making a crackdown on digital currency exchanges, many investors have been alarmed by this development.
In fact, China isn’t done with its clampdown on the digital currency market. In a report from Bloomberg and Reuters, China has been planning to ban even the access to international digital currency exchanges.
Charles Hayter, the CEO of CryptoCompare, mentioned that “trade volumes were very noisy yesterday as the bulls and bears fought it out and some sort of calm has appeared on the markets after what has been a severe correction”. He added that “This market is now big and governments are sensing revenue for the coffers as well as a threat in some degrees. This will catalyze regulations where regimes who legislate severely will balkanize themselves to the industry”.
Should it be good in the long run for cryptocurrencies? According to Hayter, yes, this move will be for the betterment of cryptocurrency world. However, there is a chance that bureaucracy can inhibit the growth of digital currencies overall.
Volatile in Nature
The regulators are bothered by the fact that digital assets are extremely volatile. Also, governments are worried about the potential use of digital currencies in illicit activity.
So is it really normal for digital currencies to drop so much in a short period of time? Nolan Baurle, the director of research at CoinDesk mentioned that digital currency fluctuations can occur from 25% to 40%. And also, he added that cryptocurrencies usually bounce back. And this is exactly what happened to digital currencies. However, Bitcoin has struggled to reach the $20k high from December. Will there be a bullish trend coming for cryptocurrencies in the coming weeks?