The crypto world has experienced a significant fall in prices of cryptocurrencies across the board. This began in the early hours of Tuesday, January 16 and continued for the most part of the week with a few rebounds here and there. This fall in price saw Bitcoin drop in price by about 15% in the initial stages, make a rebound and fall even further, while some altcoins have shed about 90% of their original value in price before the swoon.
The Asian impact
This is not the first time that cryptocurrencies are responding in such a manner especially after some resistive measures by governments. This time around, the popular narrative is that this market behaviour is as a result of the most recent regulatory pressure from China and South Korea.
In the first quarter of 2017, an announcement by the People’s Bank of China (PBoC) indicating plans to regulate the cryptocurrency operations within China gave rise to a similar situation. However, that fall in price was short-lived as Bitcoin especially recovered fully and even set new price records in just a few days. This same pattern was repeated a couple of times throughout 2017, especially as a couple of countries in the Asian continent came out with various announcements on actions or intentions towards the cryptocurrency ecosystem.
The impact that these Asian nations are having on the crypto industry is related to the high level of participation that the industry receives from that region.
An opportunity for long-term traders
The CEO of Netcoins, Michael Vogel tells CCN that this is borne out of the fact that these Asian countries have been among the earliest adopters of cryptocurrency, and this is often why negative news in Asia (or perceived negative news) can cause panic selling in other parts of the world.
“We've seen this many times, however, it is important to remember the irony though; Bitcoin hit all-time high price months after China first proclaimed its reluctance to embrace Bitcoin”, says Vogel.
Vogels elaborates that this recent drop in price is indicative of a long term trend. He notes that it is just a reminder that cryptocurrency is volatile and it is typical of long term traders to jump at the opportunity to make discount buy-orders.
A natural phenomenon
The President of Blockchain TV, Jason Cassidy explains that as the collective market cap for cryptocurrencies grows it is only natural to see pull backs such as experienced recently. He notes that regardless of what is driving the market down that such market behaviour is healthy to have 'breathers' in between adding hundreds of billions of dollars to the market capitalization in rapid succession.
On the impact that Asia is having on cryptocurrencies, Cassidy says:
“Currently a large amount of global trading volume takes place in the East, so China has and will continue to have an impact on the markets. As always, the top currencies will recover the fastest and live to see another day. You will notice market swings like this can also be the catalyst for the end of life cycle for low-value coins or outright scams. Bitconnect is a recent example of this. “Expect to see more malinvestment cleared out of the industry as the overall IQ of the space matures.”
A ‘shake-up’ in the industry
Nascent projects within the crypto space, especially those with base in Asia are being affected by this development. It takes significant robustness and genuine expertise for emerging projects to survive seasons like this where authorities make ambiguous regulatory statements, leaving the community with a lot of uncertainties.
Situations like this are necessary to separate actual developmental products from ‘paper-based’ arrangements that give the industry a bad name. However, relevant authorities need to come up with clear terms and to do so quickly in order to avoid the market uncertainty that is responsible for the panic within the ecosystem.
Repeated events have shown how significant the Asian community is to the blockchain industry. Having led the way in the early adoption of the technology, and natural factors such as population, which by extension influences the market size have placed the region in a prominent position within the industry. For how long this will continue remains to be known, but the power of Asia in the current crypto industry can no longer be taken for granted.
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