Cryptocurrencies started as nothing more than just a concept and today, it comprises of a billion-dollar industry. Many people have been critical of them but some have hailed them as the best alternative to fiat money. The ongoing bear market run seems to be giving some credibility to critics, and some people are worried that interest in cryptocurrencies is fading.
Interest is indeed fading
The cryptocurrency markets are not in their best shape. The current bear market run started around May and has been getting worse at an increasing pace. Bitcoin, the most popular cryptocurrency, has taken the brunt of this fall. Bitcoin prices have fallen by more than $15,000 since their highest price of over $19,000 at the end of 2017. Bitcoin prices have been ranging at about $3,500 after having fallen from the assumed support of $6,000, and there are concerns that they could dip even lower.
Expectedly, most Bitcoin holders have been selling off their coins to cut their losses in anticipation of further declines in prices. This is fueling the ongoing bear market run and effectively making more and more people lose confidence and interest in cryptocurrencies altogether. Other factors are also playing a huge role:
Miners are laying down their tools
Cryptocurrency mining is just one of the many industries that have popped up around the crypto markets. Mining is currently dominated by million-dollar companies capable of buying and maintaining the expensive equipment needed for mining. Millions of individuals also do it via mining pools. Together, miners form the backbone of the cryptocurrency markets as they facilitate their minting and distribution – the markets would become stagnant without miners.
Many miners, especially individuals, are quitting mining owing to the ongoing bear market. Miners are rewarded for their efforts using the cryptocurrencies they mine. Bitcoin miners, in particular, have been motivated by the past bull market so much that they invested thousands and even millions of dollars into mining equipment. Unfortunately, the falling prices are eroding all profits and making the effort not worth it.
If this persists, the cryptocurrency markets will certainly become stagnant as circulation will be hampered.
Merchants are keeping off crypto
The rise of Bitcoin seemed to give credibility to cryptocurrencies as a means of payment. To this end, merchants all over the world are (or have been) making accommodations to accept cryptocurrencies for payments. Even financial companies have been modifying their platforms to accommodate cryptocurrencies on behalf of their clients. However, this is fast changing owing to the ongoing bear market run.
Most merchants are choosing to stick with the traditional forms of payment owing to fall in prices and increase in volatility levels. Merchants are worried that the fall in prices will erode their profits for goods and services sold for cryptocurrencies. Considering that cryptocurrencies have effectively failed as investment assets, they are pretty much useless now that they cannot function as currencies as was intended.
Frauds are not helping matters
Thousands of cryptocurrencies have popped up since Bitcoin went main-stream thanks in part to the rise of Ethereum and the ERC20 platform. Most of these cryptocurrencies are legitimate but a good number of them are outright frauds.
Scammers have been attracted to the cryptocurrency industry by the lucrative ICOs – it is estimated that ICOs have raised more than $20 billion in just 2 years. Investors too have been lured to ICOs by the confidence asserted by other investors. However, ICOs are risky investment vehicles as no assurances are given. Scammers know this and feel confident that they can defraud investors and get away with it as most cryptocurrencies and ICOs are not regulated by the law.
Thousands of investors have lost millions of dollars to ICOs and, naturally, most would rather stay away from them; and cryptocurrencies in general. This is also giving credibility to critics and dissuading other interested investors from investing.
Governments are muscling in
One of the main conveniences of cryptocurrencies is that they are not regulated by the government – in fact, this was the main motivation for Satoshi Nakamoto, the mysterious individual behind Bitcoin. However, governments are exploiting more ways to regulate cryptocurrencies as they seek to rein in the markets. For instance, the U.S. Securities and Exchange Commission is calling for international cooperation between governments and international financial agencies in a bid to regulate and control cryptocurrencies.
Other countries are avoiding the hassle and banning cryptocurrencies altogether – cryptocurrencies are illegal in many countries including China and Russia. This is limiting the markets as millions of people get locked out. It is also robbing cryptocurrencies of some of the credibility they have been building up.
It is temporary
There is no doubt that interest in the crypto markets is fading fast. However, many supporters of these markets are optimistic that their future will be brighter.
Financial markets in general deal with falls from time to time. For instance, the conventional financial systems were in the same position for less than a decade alone, following the global economic collapse. This is the same thing that is happening with the crypto markets. And, just like the traditional markets, analysts expect that the ongoing bear market run will die off with time – the problem is that there is uncertainty about how long this will take as well as doubts raised by the fact that the cryptocurrency markets are still in infancy.
Several notable figures and investors in the cryptocurrency markets have called for crypto owners to bear with the current decline in prices and essentially sit on their cryptocurrencies in anticipation of a rebound in prices. If this turns out to be true, a rebound in the crypto markets would seal their credibility and arouse greater confidence and interest from the public.
All in all, the cryptocurrency markets are in a bad place and it is expected that things will only get worse. Naturally, many investors are losing interest and confidence in the markets and opting to keep off. It is not clear how long this will last, but analysts say that it is only natural and that it will pass.