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2017 fluctuated the reviews of the crypto-currencies daily. Despite a generally positive history, the market remains vulnerable to unpredictable and extreme fluctuations.
While a part of the volatility is caused by the fact, as the model of the crypto-currencies nature and the fact it was designed – primarily because of its deflator that most of the Coins are still seen as an Investment and as speculative investments, there were also external factors that influenced the price movement.
The growth of the spotlight for Bitcoin and its contemporaries led to shoot the value of the original crypto-currency. The meteoric rise has resulted in a proliferation of market participation, and paved multitudes of private investors, the path to the crypto industry. However, this has also be directed, in the view of the governments and international actors in the industry. A factor that has played a large role in the volatility and could play, in particular if previous regulation efforts are an indication.
is A striking example of how regulations of unintended consequences in the financial markets, the Dodd-Frank Act. Due to the restrictions for banks are many well-known money institutions had to reduce their Market-Making activities in certain asset classes, in order to achieve higher capital ratios required by the regulations. The reduction of Market-Making liquidity affect the price discovery process. In particular, the bond market does not have the liquidity of a foreign stock exchange or a stock exchange, it can lead directly into a snow ball effect, the fluctuations in price calls forth more, rather than you to contain.
Despite the best intentions of the regulators, the values of the cryptographic remain currencies strongly tied to speculation and optimism. For this reason, drastic political changes can affect the short-term direction, as a few examples over the last few years have shown.
However, the long-term effects are somewhat opaque, since many of these regulations only a few months old. Even if you could in the future lead to a more stable market, the shows will be a Plethora of questions around this theme, such as effective regulations really, and to what extent they will affect prices in the future.
Why have rules to influence the prices
The original Boom in crypto currencies took place in a regulated environment. Even as news agencies and investors, the market pay more attention to, the regulatory authorities and international actors on distance, and prices rise unabated.
developed During the Supervisory authorities began in the year 2017, the first steps in the direction of bridling of the market, the almost ten-year-old crypto-currencies relatively unhindered. For the supervisors this meant that you try to build a frame to something that grows, by nature, chaotic.
This Trend was mostly due to the explosive growth of the ICOs are visible, with which many Blockchain could Finance companies. In the year 2017 achieved Blockchain-based companies an unprecedented amount of 3,25 billion euros, although the Securities and Exchange Commission, circled above them. The increase in the Kaptials was not without errors, and several published incidents underlined the relative lawlessness of the current model.
Hartej Sawhney, co – founder of Hosho – a Blockchain and Smart Contracts auditing and security company, looked at a wide variety of Smart Contracts seen and examined, noted:
“there is Currently no regulatory authority, the standard procedure for companies in the Blockchain Ecosystem.
The number of successful attacks and data breach with a high level of awareness is also an indication of the security weaknesses, which many companies and organizations. But you ignore them because of the lack of laws, which is an important factor in the volatility of cryptocurrency prices.
thought-out projects within the Blockchain Ecosystem is supported by investors and stock exchanges, only stronger, if a regulatory environment is created.
clarity of laws is better than having no law at all. Gibraltar is a great example of a country that has made its approach to the regulation of the Blockchain clearly, so that companies around the world close together, to settle there.”
This ‘Wild West’ of crypto market had a psychological effect on the investors. Due to the decentralized nature and the lack of regulatory structures of crypto-currencies, many people see the regulations as a tactic to slow this explosive growth and the volatility, which is the hallmark of this industry.
market reactions
The result is a market in the news or speculation about imminent regulations lead to massive movements in one direction or the other, since investors buy premature Coins or sell and, consequently, to the instability of the prices. Bitcoin, for example, lost almost half its value, as the popular exchange Coinbase has has launched an internal investigation, dealing with fraudulent practices and market manipulation on its platform.
In recent times, prices have fallen for most crypto-currencies, after South Korea announced niche of Supervisory authorities to prohibit the crypto trading completely, or at least significant market introduce controls.
The result is a more than a 15 percent loss in the value of Bitcoin, while Ethereum, Ripple, Litecoin and most of the other major crypto currencies, their market capital is lost within a few hours to double-digit amounts.
But all the rules can lead to negative shocks. After the South Korean government had changed its course and a more positive tone, changed the negative course of the crypto-jerk-currencies-like and generated a significant revival.
Already earlier, Japan’s public attitude towards crypto-currencies, Wert Bitcoin to historic highs helped.
had fallen As the value of a ban by the Chinese government to 2.438 Euro, jumped the price of the crypto currency in September by 96 percent to 4.758 Euro. The country announced that Bitcoin will be introduced as a legal payment method, which led to a frenzy of crypto-currencies in Asia.
Adv. Aviya Arika, the head of the Blockchain Blockchain development at the law firm of Porat & co., which has for a Long time, with the vague regulatory environment, noted:
“In contrast to the, what might you say instinct you can regulate the prices actually.
Regulatory uncertainties, as well as direct prohibitions on the part of the governments have proven to be for the crypto markets as harmful.
If investors / Users are not sure about how to pay tax on the sale of crypto, or unsure about the General legitimacy, they wait for the most likely, or refrain from buying. This behaviour leads to a pessimistic market.
If the Supervisory authorities bring light to the viewing of the crypto currencies, way, feel, investors and users safe, as crypto can use it as a medium of exchange, as a financial instrument, or in a different Form.
in General, I think that more and more jurisdictions regulate the legal status of crypto-currencies, and be clear, so that the crypto markets are much more stable and widely accepted.”
In addition, the introduction of crypto-currencies in Mainstream investments are at best mixed. As the Chicago Board Options Exchange announced that they would offer Bitcoin Futures contracts, has stopped trading within a period of six days three Times, after the courses are to umgeschwungen strong, which led to alarms and downtime.
Overall, outweighs the user currencies, the mood is still the ability of Crypto to hold their value, and the divergence of real assets such as Gold, means that speculation and knee-jerk reactions will continue to have a sizing effect on price fluctuations.
long-term effects remain opaque
Despite the increasing attention to the sector crypto currencies for many financial observers who try to predict prices, remains a mystery. Regardless of their almost 10-year existence, the cryptocurrency industry is still in its infancy. The regulatory authorities have only Recently begun to think about the possibilities to prevent some of the more dangerous practices that are customary in the market,. They met, however, strong opposition.
The majority recognize that the blockchain – the underlying technology that supports many of the features of crypto-currencies – is a crucial component of the future. However, have put regulations on the market so far as a Blockade for the Blockchain-sector.
In addition, ICOs are still a serious Problem for governments and Supervisory authorities, which give their high susceptibility to fraud, theft, Hacking and other unethical practices to keep in mind.
the young age of The sector also makes it difficult, the long-term effects of regulations estimated. Even after the violent price fluctuations, Bitcoin prices have currencies, like most other Crypto, and self-corrected. The real regulations around the world are concrete, while the image is still tarnished.
2018 should be an important measure of how the regulation affects the industry. In the meantime, investors must always remain vigilant, when you consider that more, not less, regulations are in sight, what can in the short term, trigger violent reactions and long-term investment strategies are at best haphazard appearance.
