Crypto markets choke amid regulatory clampdowns

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Jeffrey Gogo
Cryptocurrencies fell sharply during the first three months of this year, as regulators in major world economies clamped down on virtual money.

In 2017, prices surged phenomenally, as much as 30 000 percent in some instances, amid a worldwide explosion of interest and investment in digital coins.

The total market value of cryptocurrencies more than halved to $260 billion at the end of March, from over $600 billion at the beginning of January, according to figures from Coinmarketcap.com, a website that tracks hundreds of coins.

Of the top five cryptos, Ripple (XRP) fell fastest. The coin, billed as a cheaper and speedier settlement option compared to trendsetter Bitcoin, lost nearly 80 percent to 51c. In January, the price of Ripple flactuated around $2,99. It broke the $3,81 level at some point in January.

Bitcoin off-shoot Bitcoin Cash (BCH) plunged more than 70 percent to $700 from $2,540 three months ago. At its peak, BCH tested $3 000.

The benchmark cryptocurrency Bitcoin, lost the most in a first quarter since going online ten years ago.

The coin skid 51 percent to $6 900 at the end of March, from $14 100 at the beginning of the year.

Bitcoin is down more than 65 percent from its all time high of $20 000 reached in December.

In the review period, Litecoin (LTC) and Ethereum (ETH) both lost just under 50 percent each to $118 and $394, respectively. On January 1, LTC traded at $230 and ETH above $750.

Cryptocurrencies, as represented by Bitcoin, have since launch in 2009 drawn criticism and support almost in equal measure, but a clampdown by governments seeking to assert control over a technology claiming independence has shaken crypto markets down to the core.

From China to South Korea, Japan to the US, financial regulators have made it their goal to bring cryptocurrencies under their control, shutting down digital currency exchanges or effecting strict regulation for their trade.

In March, the European Central Bank (ECB) announced that it will launch a new settlement system called Target Instant Payment Settlement, in November, in a clear effort to undermine cryptocurrencies.

ECB officials claim that their technology will be better than blockchain, the technology that supports Bitcoin, and the rest its digital coin cousins.

The crash in the price of cryptocurrencies during the first three months of 2017 seems in large part to reflect this crackdown.

And also negative sentiment issuing from the recent banning of crypto-related advertising by big technology firms Google, Facebook and Twitter.

Then there is also that matter of the inevitable price correction following Bitcoin’s 1 400 percent lift last year.

Here, as elsewhere, prices wobbled for the most part during the review quarter, and then dropped sharply tracking international prices.

Bitcoin plummeted more than 40 percent to around $12 500 at the end of the quarter, from over $21 000 three months earlier, according to Golix.com, a Harare-based cryptocurrency exchange, and Zimbabwe’s biggest.

Litecoin and Bitcoin Cash fell 55 percent and 70 percent to about $195 and $1 200, respectively. Ethereum, Dash and Bitcoin Gold, the three other coins quoted on Golix, were all in the red, by significant margins.

Missed forecasts

The first quarter figures came in worse than expected. When the year started, most analysts had been bullish about the performance of cryptocurrency markets in 2018, cheered on by the mainstreaming of Bitcoin on two major US stock exchanges late last year.

Pundits had projected the rise of altcoins — basically those digital coins which aren’t Bitcoin — largely because they were priced lower and promised to facilitate, likewise, cheaper and faster settlement cycles compared to Bitcoin.

Many are still holding out for this anticipated growth in 2018, nonetheless. And that’s because, historically, periods of sustained declines in cryptocurrency prices earlier on in the year are not unusual. Trends show prices tend to recover as the year wears on.

Golix spokesperson Nhlawelnhle Ngwenya believes markets will stabilise and that the ongoing regulatory onslaught will come to a rational end.

“Cryptocurrencies have proven to be a very effective form of value transfer that is relevant in every part of the world,” said Ngwenya, in an interview.

“However, it is important to remember that cryptocurrencies and blockchain technology are a relatively new phenomenon that is still being fully unpacked. As a result, many entities are yet to understand how they work so there is bound to be a cautious reception from them” he said.

Ngwenya said that “the reaction of regulators — through regulatory control — are understandable at this stage.”

He urged investors to “take advantage of the international payments services offered through cryptocurrencies”, including payments “for cases such as buying cars abroad and receiving money” to ride off crypto markets volatility.

Early morning April 4, Bitcoin traded around $7 284 on Coinbase and at about $11,000 on Golix.

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