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Cryptocurrency scams and bankruptcies have seen the value of Bitcoin and other cryptos plummet as investors have rushed to dump their stakes.
But investors hoping for a market rebound may have to wait until the spring for prices to rise again.
Bitbank, one of the leading exchanges, expects Bitcoin to recover to between $20,000 and $30,000 after the second quarter, and only if the US Federal Reserve stops hiking interest rates and starts cutting them early next year.
Standard Chartered bank takes the opposite view.
Analysts are warning investors that more crypto failures are on the way, driving prices down up to 70 per cent to bottom out at around $5,000.
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Plagued By Fraud And Bankruptcies
Bitcoin started the year at $16,605 and has followed an upwards path to reach the current price of $18,116.
However, the cryptocurrency price is far from reaching the heady levels of the 12-month high of $47,454 in March or the record high of $66,400 in November 2021.
The latest round of fraud and bankruptcies that plague Bitcoin and the cryptocurrency world have provoked American regulators to issue a severe wealth warning to investors.
In an unprecedented move, the US Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, issued a joint statement revealing they are monitoring the crypto activities of leading banks.
“The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” the statement said.
US Regulators Issue Crypto Warning
The regulators added that issuing or holding crypto tokens stored on public decentralised networks was “highly likely to be inconsistent with safe and sound banking practices”.
Banks were also encouraged to take steps to avoid problems in the digital asset market spreading to the broader financial system.
“Risks related to the crypto-asset sector that cannot be mitigated or controlled mustn’t migrate to the banking system,” the statement continued.
The announcement followed months of hesitancy by US financial watchdogs to set guidelines on cryptocurrencies despite calls from the banks for straightforward advice.
Fourteen years of fraud and scandal have rocked the cryptocurrency market, but the sad truth is that the crypto system works fine – when people step in, everything seems to go wrong.
The weak point of the market are cryptocurrency exchanges.
No One Controls Crypto
Exchanges regularly go to the wall with millions of dollars of missing funds. Moreover, as US regulators point out, crypto has no rules, no one is responsible for policing the market and fraudsters can easily run scams with little fear of detection.
That’s why governments are unlikely to adopt cryptocurrency as day-to-day spending money. In addition, a lack of trust in the accountability of the market’s people has put the brakes on a wider take-up of virtual currencies.
Instead of the Bitcoin dollar or pound, many countries have their central banks working on digital currencies under government control.
So where does that leave cryptocurrency? One comment economists tend to make about financial bubbles is they are formed by investors making irrational decisions.
To illustrate this, the story goes that one day an economist noticed the price of tins of sardines was inexplicably rising, but no one understood why. The economist resolved to open the tin to see what was inside and found it was full of sardines. Another economist told him he should not be surprised as the tins were for buying and selling, not opening.
Sardines And Bubbles
You can swap out sardines for any bubble, from tulips to cryptocurrency.
Predicting the future of cryptocurrency is notoriously difficult.
Taking a view at what’s happening at Coinbase, the world’s second largest exchange behind Binance, may throw some light on what the market expects. Coinbase has announced a third round of job losses, cutting 950 posts – roughly a fifth of the company’s global workforce.
Coinbase is restructuring to cope with the sharp downturn in cryptocurrency values blamed on fraudsters, higher interest rates and a slowing global economy.
“In 2022, the crypto market trended downwards along with the broader macroeconomy. We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion,” said a blog on the company website.
Offshore Rogues Hold Back Crypto
The blog is designed to promote trust in the exchange and blames loose regulation for leaving an offshore hole crooks can exploit.
“We believe that what’s happening now is yet another example of why strong, clear regulatory standards are so important,” said the blog.
“Fragmented, opaque regulatory frameworks in the U.S. are driving crypto to offshore unregulated exchanges, where looser regulations can put customers at risk. Congress needs to provide clear, national rules for crypto — and make those rules workable so companies aren’t rewarded for building outside the U.S.
“That’s why Coinbase has leaned into regulation from the very beginning. While it may feel somewhat burdensome at times, it means our customers can trust that their assets are safe.”
Taking an overview of the market, crypto will remain around current values until regulators act – and that’s unlikely to happen due to the offshore nature of the industry.
Cryptocurrency 2023 FAQ
Cryptocurrency is a decentralised digital currency that only exists online. The underlying technology that runs crypto is called a blockchain.
Essentially, a blockchain is a tamper-proof ledger or database of cryptocurrency transactions. A cryptocurrency can run on a dedicated blockchain or share a blockchain with other cryptos. The blockchain lists any change of ownership of a token.
Tokens are specific virtual currencies, such as Bitcoin, Ether or XRP.
Keys appl;y security toIs my money safe in a crypto e the blockchain. Public keys identify the tokens in a transaction, while private keys authorise the user access to an account.
Crypto exchanges are like banks. Regardless of how sophisticated the security, a robber can walk in the door and hold up the staff. A hacker is the crypto equivalent of a robber. This example highlights the weakness in crypto security and shows investors cannot eliminate the risk of fraud.
Other types of security exist – hot systems use computers and drives linked to the internet, while cold systems only connect to the internet to carry out transactions.
The sad answer is no one. A country’s police is responsible for policing incidents happening within the country’s borders, but because crypto is not resident in any country, no police or regulator has overall responsibility or control of the system.
This was perceived as a strength by the originators of Bitcoin but has turned out to be a weakness holding back the general take-up of cryptocurrencies.
Related Information
Below is a list of related articles you may find of interest.
The Bitcoin exchange rate can rise or fall sharply. The reason is the news that affects Bitcoin, as well as the reaction of Internet users to them. Therefore, investment risks remain. It is better to invest little by little in potentially profitable cryptocurrencies like Crypton (CRP) is a unique cryptocurrency backed by an entire decentralized ecosystem.