Vinny Lingham, a general partner at Multicoin Capital and the CEO of Civic, believes the crypto market won’t recover any time soon.
The crypto market will rise again, but most likely only when the pain of the recent fall becomes a distant memory. Don’t underestimate the power of psychology in free markets.
Why Crypto Could Take a Long Time to Recover
In 2017, the crypto market saw one of the most intense bull runs in its decade-long history fueled by the sudden emergence of retail traders and individual investors in regions like Japan and South Korea.
At one point, the demand for crypto in South Korea surged to a point in which the premium of the Bitcoin price achieved 20 to 30 percent. When Bitcoin was trading at an all-time high at $19,500 in the U.S. market, it was trading at over $23,000 in South Korea.
At the time, investors of all ages from teenagers to middle-aged employees invested heavily in the cryptocurrency market. Many investors saw their neighbors getting rich off of crypto and could not resist.
Teenagers utilized their parents’ bank accounts without authorization to purchase crypto and many individuals in their 40s that felt stuck in their jobs that pay less than $30,000 per year — the GDP per capita in South Korea is $29,742 — invested in crypto, seeing a glimpse of hope.
Nathaniel Popper, a journalist at The New York Times, reported that Kim Hyon-jeong, a 45-year-old teacher and a single mother, invested $90,000 into cryptocurrencies in the fall of 2017, $25,000 from a loan.
In South Korea, especially in the outskirts of Seoul, teachers are paid on average about $3,000 a month, and with the irrationally high rent costs at the capital, the majority of teachers and government employees are left with less than $1,500 to save on a monthly basis.
As crypto prices plunged, Kim lost most of her money, which may take well over 10 years to recover considering the interest on the bank loan she acquired.
“I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us. I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around,” she said.
Even now, after the fourth largest bear market in the last 10 years, cryptocurrencies are recognized as a sign of hope for millennials that have given up on the idea of obtaining a stable job, earning enough money to purchase a house in Seoul, and getting married due to the declining economy of South Korea.
Regardless of how millennials perceive cryptocurrencies in markets like Japan and South Korea, it could take a long time for retail traders to psychologically recover from the three-month period from November to January of 2018 when prices spiked by well over 200 percent and plunged to extremely low levels.
On average, it has taken the crypto market 62 weeks to recover from major corrections, approximately a year and three months.
But, because of the mainstream media coverage it received and the exposure it gained, crypto could certainly take longer than a year and a quarter to fully recover.
India’s proposed crypto ban is ‘corrupt’ says Tim Draper
- India’s proposed bill is “pathetic and corrupt,” Tim Draper.
- Draper is known for his public support for Bitcoin and freedom to use cryptocurrencies.
Following a leaked bill from the India government proposed a blanket ban on cryptocurrency, Tim Draper, a Bitcoin support and investor in Tezos has come out to condemn the move. The outspoken investor has recently advocated Bitcoin to the government of Argentina. He refers to India’s proposed bill as being “pathetic and corrupt.”
He wrote on Twitter:
“People behaving badly! India’s government banned Bitcoin, a currency providing great hope for prosperity in a country that desperately needs it. Shame on India leadership.”
His comments have not been received well by the people on Twitter with some saying that Draper has not confirmed the developments and is acting on hearsay only. Draper is known for his public support for Bitcoin and freedom to use cryptocurrencies and does not support government involvement in terms of regulating the space.
As reported by FXStreet, a lawyer in India shared what he referred to as the evidence of a draft law that could be used to ban cryptocurrencies in India except for the ‘Digital Rupee,” a digital asset that will be issued and backed by the Reserve Bank of India.
More on India’s leaked draft bill: India’s battle with crypto ban continues: “Digital Rupee” to be only the digital currency
France’s Financial Watchdog Proposes ‘Voluntary’ Regulatory Framework for Crypto Firms
The Financial Markets Authority (AMF), France’s top financial organization, plans to release an experimental regulatory framework for crypto firms later this month, according to a Reuters report.
The rules will include capital requirements, tax mandates, and consumer protection protocols – which “crypto-related firms will voluntarily abide by” in exchange for regulatory approval, reports Reuters.
Anne Marechal, executive director for legal affairs at the AMF, called the experimental arrangement a “precursor” for international crypto-specific legislation, rather than the mismatched application of financial regulations written prior to the advent of the asset class.
This is not the first time France has unveiled a “tit for tat” regulatory scheme. In April, the AMF released a requirement for banks to open accounts for crypto firms that “opt in” to being regulated. Part of the PACTE law, crypto exchanges and custodians were also extended the “option” to attain an operating visa.
At the time, Finance Minister Bruno Le Maire suggested the European Union follow “the French experience” by using the PACTE guidance to set up a “single regulatory framework” for digital assets in the EU single market.
These relatively unrestrictive legal measures were taken to promote the growth of small and medium-size businesses. While some governments, organizations, or industry leaders call explicitly for self-regulation or no regulation, many believe clearer rules regarding the sale, distribution, trading of cryptocurrencies would stimulate, rather than hamper, the industry.
Frederic Montagnon, the co-founder of LGO, a crypto exchange looking to expand into France, told Reuters, “When you are an entrepreneur, the worst that can happen to you is to set up your business where there is no regulation, to see an adverse regulatory framework later imposed that jeopardizes your whole business.”
Marechal said “several” crypto exchanges, custodians, and hedge funds are in dialogue regarding the regulatory framework with the AMF, which is also set to approve “three or four” ICOs.
Specifics will arise when the watchdog publishes the regulatory guidance.
For each U.S dollar in BTC spent on the darknet, $800 is laundered, says report attacking Steven Mnuchin’s claims
Following the crypto-focused briefing by the U.S Treasury Secretary, many have drawn conclusions that best fit their financial interests. But, with Steven Mnuchin linking Bitcoin to enabling illegal activities, hardcore crypto-enthusiasts have taken the criticism personally. In an attempt to dispense of this notion, Messari.io published a detailed report to compare the top fiat’s contribution towards fraud, in comparison to the world’s leading cryptocurrency, Bitcoin.
In the report titled, “Bitcoin in the grand scheme of things,” BTC’s contribution toward illegal activities was dwarfed by the strongest of fiat establishments. Through a combined analysis of data from Chainalysis and United Nations Office on Drugs and Crime, the report claimed,
“For each $ (U.S. Dollar) in BTC spent on the darknet, at least $800 is laundered.”
While this revelation may come as a shocker to traditional financial giants, it is important to note that messari.io has considered the total volume of BTC spent on the darknet, which largely comprises of legitimate transfers.
Further, the one-on-one comparison also showed that global economies recorded an explosive increase in their stock of narrow money [M1] i.e. physical money and digital assets. With the European Union leading this race with 0.87 billion in supply, it’s currently 98% higher than BTC’s total supply expected to be recorded sometime in 2020 (considering BTC’s price to be $10,000).
The report also considered the Federal Reserve’s balance sheet from 2009, the year when BTC was launched. The report revealed that the Fed’s balance sheet showed a currency issuance rate of 13,664%, against BTC’s modest 12 billion.
This report was shared by, @fmoulin7, over a tweet directed towards Mnuchin, which read,
“Just a quick reminder… @stevenmnuchin1”
Most leaders within the cryptoverse expect the U.S. government to allow the use of crypto within the limits set by the nation’s ruling government. The remaining however, retain their optimism for a BTC-dominated future, with or without the support of the government.