Cryptocurrrency Markets Consolidate After Worst Month of FUD in History

Through the red night comes a brand new day

In what was being called Black January by Cryptocurrency traders throughout the internet, Bitcoin and it’s comrades had shown the full extent of their infamous volatility.

The roller coaster ride that saw cryptocurrency markets peak at an all-time high of $825 billion on the 7th of January then plummet down to lows of $348 billion as of the 2nd of February seem to have consolidated at a market cap of around $400 billion.

Trader stressing out because he hasn’t done his own research

The ongoing string of bad news was covered with a thick paste of melodrama by world media, despite the news having little to no affect on the day by day operations of the cryptocurrency sector at all.

The exaggerated narratives have culminated into the worst month of FUD the cryptocurrency community have ever seen.

Cryptocurrency has reached a unique time in its growth phase.

It has captured the public eye, but is not yet understood.

Many investors, traders & media representatives are using their imagination to fill in the gaps of understanding which leave too much room for melodramatic interpretations of events.

That said, the cryptocurrency market is far more sophisticated than it has been in the past, If such an savage storm of denigration had been endured a year ago, the market would have been crippled for months.

The FUD is never over, but enough has happened to prove unequivocally that the cryptocurrency market is stronger and wiser than it’s ever been before.

From here it’s important to educate ourselves in what these events truly mean for cryptocurrency, instead of worrying what temporary effect they will have on the price.

Chapter 1: The South Korean P.R. Botch Up

It began in South Korea.

South Korea, the third biggest market in the world for cryptocurrency trades

A place where institutional traders are heavily invested, and the biggest banks in the country profit from dealing in cryptocurrencies.

January, 11th. Justice Minister Park Sang-ki held a press conference where he made the now infamous statement. "There are great concerns regarding virtual currencies and the Justice Ministry is basically preparing a bill to ban cryptocurrency trading through exchanges,"

The local price of bitcoin plunged as much as 21 per cent in midday trade after the minister’s comments.

By Thursday afternoon, the Justice Ministry’s announcement had prompted more than 55,000 South Koreans to join a petition asking the presidential Blue House to halt the crackdown on the virtual currency, making the Blue House website intermittently unavailable due to heavy traffic.

The news of “Bitcoin dropping" spread through media outlets, creating a flow on effect as more investors read the news and cashed-out because of fear. — “South Korea plans to ban cryptocurrency trading, rattles market” — “Bitcoin drops $2,000 in value as South Korea announces planned trading ban”

January, 11th. crypto markets fell from a stable $730 billion to a low of $460 billion, stabilizing at around $550 billion on the 18th of January

January, 13th. In a press conference, the South Korean Ministry of Strategy and Finance told local reporters that it had first heard of the Ministry of Justice’s cryptocurrency trading ban through media reports.

“We do not share the same views as the Ministry of Justice on a potential cryptocurrency exchange ban,” MSF said according to a local website.

January, 18th. Investigations begin on Korean Government FSS Employees for insider trading.

Employees of the Korean Government discovered to be selling their coins right before the news broke about South Korea’s supposed bad on cryptocurrrencies.

The news enraged cryptocurrency investors everywhere, theories involving the government buying the dips, and shorting the futures markets ran rife for days.

January, 23rd. South Korea announced that they are not banning cryptocurrencies or wanting to stifle their growth in any way. Instead they have introduced regulations to stop money laundering and ensure sustainable tax management.

January, 31st. South Korea Finance Minister Kim Dong-yeon reaffirms South Korea’s positive position on cryptocurrency.

“There is no intention to ban or suppress cryptocurrency market,” he said in the statement.

“Regulating exchange is the government’s immediate task.”

The Results:

The whole scenario becoming the perfect definition of FUD “Fear, uncertainty & doubt” — usually characterized by unsubstantiated news and speculative rumor.

In the real world, nothing meaningful has changed at all.

In fact, South Korea has regulated cryptocurrency into existence by providing sound regulation that forces banks, exchanges and individuals to manage cryptocurrencies in a way that is economically viable for South Korean society.

Net effect on cryptocurrencies: Cryptocurrency investors in South Korea may no longer remain anonymous but on the bright side they also no longer have to fear cryptocurrencies being banned.

News effect on cryptocurrency price: Absolutely staggering. For this insignificant event to wipe hundreds of billions of dollars out of cryptocurrency markets is ridiculous. There must be more to the story.

Chapter 2: Chinese Ban On Cryptocurrrency Mining

January, 7th. China, the home to the world’s biggest network of Bitcoin miners bans cryptocurrrency mining throughout the country while also tightening its grip on Chinese ICO’s registered overseas.

An industrial bitcoin factory containing thousands of bitcoin miners — “Major blow to Bitcoin: China vows to stamp out crypto mining — “China’s Crackdown On Crypto-Mining Threatens Bitcoin’s Future

Some news outlets even claimed that China had plans to shut down domestic cryptocurrency exchanges. This caused some investors to panic even though it had already occurred last September.

The Results:

For most investors, China was already out of the Cryptocurrency Market.

Who mines the bitcoins makes no difference to us.

Most of us believe mining is a shortsighted and wasteful way to motivate people to run nodes anyway.

Bloomberg reports miners are already moving out operations to US, Canada, Iceland or other parts of the world outside of China:

Bitmain, which runs China’s two largest bitcoin-mining collectives, is setting up regional headquarters in Singapore and now has mining operations in the U.S. and Canada, Wu Jihan, the company’s co-founder, said in an interview. BTC.Top, the third-biggest mining pool, is opening a facility in Canada and ViaBTC, ranked No. 4, has operations in Iceland and America, their founders said.

The moves are unlikely to have a noticeable effect on bitcoin transaction speeds.

Net effect on cryptocurrencies: Literally non-existent. Some Bitcoin miners had to move countries. Transaction speeds and costs were unaffected.

News effect on cryptocurrency price: This situation isn’t believed to have had a direct effect on cryptocurrency markets due to the price remaining stable while this news cycle occurred. However, it may have contributed to a feeling of uncertainty which created more drastic affects when South Korea FUD occurred.

Chapter 3: Black January, The Yearly Tradition

January, 17th. Reports begin surfacing that the drop in the cryptocurrency market was also due to contributing seasonal factors, such as Chinese New Year.

This kinda went viral

Although, Mainland China has been banned from trading in cryptocurrencies since September last year, Chinese New Year is a holiday celebrated in many other countries including Taiwan, Hong Kong, Macau, Singapore, Indonesia, Malaysia, Korea, Thailand, Vietnam, Cambodia, Mauritius, Australia, and the Philippines.

This theory, while seemingly far-fetched is backed up by multiple years of data showing that late January is consistently the lowest point in the year for bitcoin prices.

Investing News reports:

David Mondrus, CEO of Trive was quoted in an email saying that the Chinese New Year–which takes place February 16–is “exerting its annual affect.”

“We expect a sideways or a slightly down price moving through mid-February, with growth again resuming in March,” he said.

In an interview with the Investing News Network (INN), Mondrus said in the weeks leading up to the Chinese New Year, the market drops because the Chinese are pulling out their money for the New Year. Mondrus further explained that the Chinese New Year is like “Christmas, New Years and Thanksgiving all rolled into one.”

The Results:

Chinese New Year doesnt cease till February the 16th, it will be interesting to see if the tides turn at once the celebrators go back to business as usual.

Regardless, we can only expect to see these January lulls increase in intensity as more and more investors take their profits during and prior to January to avoid suffering the same fates next year.

Net effect on cryptocurrencies: A theorized decrease of trading activity.

News effect on cryptocurrency price: Seems legit.

Chapter 4: The Biggest Cryptocurrency Hack Ever

Back in 2014, one of the world’s biggest bitcoin exchanges got hacked and more $400 million in investors’ bitcoins were lost. The price of bitcoin fell more than 75% to hit lows of $212 over the next year and took 2 and a half years to recover.

January, 29th. CoinCheck, a prominent Japanese cryptocurrency exchange gets hacked losing $530 million in investor funds, making it the largest cryptocurrency heist in history.

Way to show remorse Koichiro

Coincheck said in a blog post that the hack “has caused immense distress to our customers, other exchanges, and people throughout the cryptocurrency industry.”

“We would like to offer our deepest and humblest apologies to all of those involved,” the exchange said.

The exchange promised to use cash from its own funds to pay out ¥46.3 billion ($426 million) toward covering its users’ losses.

The Results:

There are currently hundreds of cryptocurrency exchanges running smoothly and providing good service to customers.

Coincheck will need to bolster their security and try to rebuild trust with its userbase, starting with repaying the lost funds to investors.

Net effect on cryptocurrencies: Big inconvenience and discomfort for a relatively small percentage of cryptocurrency traders. A warning to other exchanges that they need to get their security in order.

News effect on cryptocurrency price: A reasonably humble yet appropriate impact on market prices.

Chapter 5: Bitfinex To Be Untethered

January, 31st. Bloomberg digs up an old subpoena from early December which requests Bitfinex to prove that USDT is backed by U.S. dollars and not being printed out of thin air. (Like U.S. Dollars are).

The media have a field day with speculations that this situation could cause cryptocurrency markets to fall 80% despite Tether only holding a measly 0.5% of the total cryptocurrency market cap.

Newspaper writes article about itself

Express News — “Bitcoin price CRASH 'BLOODBATH’: Cryptocurrency could drop 80% as tether criticism rise — ‘Without this bitcoin price would collapse’: Fears grow over tether ‘printing press’ as auditors part ways

Questions about Tether’s concluded relationship with their auditors gave rise to speculation of suspicion, however Friedmans previous audit conducted in September had confirmed that Tether had $442.9 cash sitting in banks on reserve, which matched the entire outstanding issuance of USDT at the time.

Tether have a very clear cut message about redeeming USDT for USD in their terms of service “Absent a reasonable legal justification not to redeem Tether Tokens, and provided that you are a fully verified customer of Tether, your Tether Tokens are freely redeemable.”

Charlie Lee, the outspoken founder of Litecoin has provided some refreshing insight into the situation.

“With respect to the Tether situation, it’s expected for CFTC to subpoena Bitfinex to investigate if there are any wrongdoings. The fact that the subpoena is in December 2017 and they have still continued issuing USDT is good news.” He said via tweet.

“If it turns out that USDT is not backed by real USD, the price will crash to 0. This is similar to what happened with BitConnect BCC. It should not affect BTC or any other altcoins. The reason why it does is because people are afraid of it affecting and they sell. This becomes a self-fulfilling prophecy. People afraid of price crashing, sell their coins, and cause the price to actually crash.”

Even if Tether have maintained the same cash reserves as their previous audit, this would give them a reserve of over 20% of the $2 billion they currently owe, this is far beyond the 10% reserve that U.S. banks are required to keep.

The Results:

USDT, will eventually be audited again, and either be found to have enough USD on reserve or not.

If Tether have acceptable reserves of USD, no harm done. If not, people will cash in what they can and everyone else will be stuck holding bags of worthless UDST coins.

In any case, there is no sensible conclusion which results in USDT causing a cryptocurrency crash, other than the media manipulation of the situation causing investors to trade emotionally based on fear, uncertainty and distrust.

For a very well-thought out and measured perspective on the USDT situation visit Cryptoscopia on Steemit.

Net effect on cryptocurrencies: High likelihood of zero wrongdoing and zero effect. In the unlikely event that USDT is actually worthless. The people holding USDT will lose money. Knowing what they know now, they shouldn’t be holding USDT anyway.

News effect on cryptocurrency price: Absolutely ridiculous, the amount of fear and panic this situation has caused is mind-boggling.

Chapter 6: Facebook Bans Cryptocurrrency Sponsored Ads

January, 31st. Facebook releases a statement saying “We’ve created a new policy that prohibits ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings and cryptocurrency,”

Zucks can’t believe Facebook’s banning cryptocurrency ads

The media once again, goes wild. — CRYPTOCURRENCY VALUES PLUNGE AMID FACEBOOK BAN, NEW REGULATION AND HEISTS — Bitcoin tanks as Facebook bans cryptocurrency adverts

The policy of blocking cryptocurrency related ads is intended to protect investors from scams and fake ICO’s that would further harm trust between Facebook and it’s users.

This policy benefits the Cyptocurrency community by protecting investors from being stung by scammers.

It’s a good thing.

Who needs Facebook ads anyway?

Currently the majority of cryptocurrency investors gain their knowledge by word of mouth from trusted communities such as Social influencers, Facebook groups, Sub-Reddits, Telegram groups, Cryptocurrency forums, Messenger group chats and general word of mouth.

When pyramid schemes like USI-tech and BitConnect are promoted through these channels this community rallies against them.

When community members find or receive phishing emails, fake ICO addresses and other scams they warn each other through these communities and gain feedback before making expensive mistakes.

Facebook as an automated ad fulfillment service have no such ability to weed out bad actors, and protect their community.

Thus were putting themselves, and the cryptocurrency community at risk by allowing scammers to create ads with no approval process.

The Result:

Most cryptocurrency investors already know not to trust sponsored ads, and know to do their due diligence on any ICO’s they invest in. Our information comes from each other and a small amount of trusted online sources.

We will now have a more engaged community to work with who has been scammed less, and therefore has more money to invest in worthy projects.

Net effect on cryptocurrencies: The banning of Facebook ads may be slightly annoying to some legitimate cryptocurrency companies but the overall it’s good for the community.

News effect on cryptocurrency price: Overblown. Despite Mark Zuckerburgs previous excitement about blockchain technology, the crypto world feels he’s turned on us and is trying to shut us down. This is not the case. Read the statement, as it is, without reading into it. It’s good business. For all of us.

Chapter 7: The Great Indian FUD

February, 2nd. In a situation that closely resembled South Korea just weeks before, India’s finance minister Arun Jaitley released a statement.

“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payments system”.

The iconic Taj Mahal has absolutely nothing to do with cryptocurrency

The media absolutely loved it. — “Bitcoin in India: Has India just destroyed Bitcoin? Will BTC now crash?”

Quartz India — “Arun Jaitley has just killed India’s cryptocurrency party,”

Ajeet Khurana, head of the BACC clarified the statement made by the minister

“What the Finance Minister might be saying is that cryptocurrency is not considered to be a part of these payment systems.” He said. “Similarly, gold is not part of a payment system, but people still barter assets like gold for goods, as long as both parties record the transaction. It is an asset barter transaction.”

“There has been no indication by the government that it is banning exchanges. Neither does it stop people from holding a cryptocurrency. It is just saying that the government doesn’t recognize cryptocurrency as money, which no country in the world does except Japan.”

Sathvik Vishwanath, chief executive Unocoin, one of India’s largest cryptocurrency exchanges seems unphased by all the fuss.

“We did not see any change in the stance of the government.” He said. “We are pleased the authorities are taking action against illicit usage of cryptocurrencies but, otherwise, there is no reason for any panic. It’s business as usual at Unocoin.”

The Blockchain and Cryptocurrency Committee of India weighed in as well.

“When a platform as significant as the Union Budget speech mentions cryptocurrencies, it is clear that the sector is coming of age. We welcome this positive development, and see it as an important milestone in the journey to policy-clarity and consumer-education.”

The Result:

India will likely become more proactive in tracking illegal activities funded through cryptocurrencies.

Everything else seems as if it will remain unchanged.

Net effect on cryptocurrencies: This barely even effects anyone in India, and even if it did, this is one country with small trading volume. This literally doesn’t matter at all.

News effect on cryptocurrency price: The news articles that came out after this event stacked on top of the rest of the FUD that’s has landed this month and become too much to bare for many traders.

In Summary

Functionally, the fundamental core of cryptocurrency remains completely unaffected.

Exchanges are still running, miners are still digging and developers are still building.

It’s the speculators who don’t understand the societal value cryptocurrency who are panicking and selling off their portfolio’s, lowering the price further.

Media manipulation is not new, everyday we see them try to sway us against politicians, opinions & beliefs.

They’re good at it, they do it for a living.

This may be the first time we’ve seen such excessive attacks performed against a piece of technology.

Who knew you could assassinate the character of a currency.

Despite the feverish frenzy of slander and exadgeration the cryptocurrrency market stands strong.

It shows no sign of collapse, although its price has lowered drastically. It hasn’t dipped anywhere near low enough to meaningfully affect the people on the ground floor who are working on the cryptocurrency backed solutions that will improve industries, economies and society.

If you are an investor and you are worried that the coins you have invested in will dwindle down to nothing, then you haven’t researched your investments well enough.

There are coins out there that will achieve mainstream adoption within the next few months. Real users, paying real money for cryptocurrencies that provide real solutions.

Even if every cryptocurrency investor in the world took their money out of the market. The value of these coins would organically rise again without the need of speculative markets.

This is a great opportunity to take stock of your inventory and figure out if your portfolio is as bulletproof as you think, because If you panic sold. It definitely wasn’t.

Don Draper is a seasoned investor




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