The rumors were true. China finally announced its full ban on cryptocurrency exchanges yesterday, causing catastrophic landslides in Bitcoin trading value. Hitting a new low on Monday February 5th, Bitcoin dropped below $7,000 for the first time since November 2017, losing approximately 60 percent of its value in just three months.
It wasn’t only Bitcoin that took a bashing, either. Ethereum and Ripple were also heavily affected and other cryptocurrencies as well, losing a collective total of $60 billion in just 24 hours. So, what does this mean for the future of Bitcoin, and could this be the start of the bursting bubble that so many analysts predicted?
China’s Ban on Bitcoin
You have to admit, it doesn’t look good on paper. While the threat of China banning digital currencies has long been looming overhead, the crackdown previously only applied to domestic cryptocurrency exchanges. But yesterday, the central bank announced its intention to block all cryptocurrency trading platforms, including the issuing of ICOs. Moreover, China’s infamous “great firewall” will block all cryptocurrency websites as well.
It’s still unclear whether India will follow suit, although the country’s Finance Minister, Arun Jaitley reported that the country aimed to “eliminate” usage of all digital currencies. With nothing certain as of yet, and lack of government action, a full ban is not anticipated any time soon. Moreover, India is currently a minor player in the cryptocurrency world. There are greater, more pressing threats to deal with.
One of the issues that has repeatedly hampered the widespread adoption of Bitcoin is the sticky matter of regulation. The success of the digital currency is largely tied into the banks’ reaction to it, and now they have dealt Bitcoin a further blow by starting to restrict the use of their services for buying cryptocurrencies.
Lloyds Banking Group, a major UK lender, said on Monday that people would no longer be able to buy cryptocurrencies with their credit cards. This announcement comes on the back of US banks, J.P Morgan Chase, Citigroup and Bank of America, who implemented the same policy the week before.
With all eyes on Bitcoin, Ethereum and Ripple, cryptocurrency, Tether, may have fallen under the radar, but it’s a silent and potentially deadly threat. What’s so special about Tether? Tether tokens are tied to the dollar, with one token equalling one dollar. And the largest exchange in the world, Bitfinex, has been steadily increasing supplies of Tether in the last few months.
But with the 1:1 ratio, Bitfinex has been accused of not having enough reserves of dollars to issue Tether tokens. Moreover, because of Tether’s dollar value, the price of cryptocurrencies like Bitcoin could have been inflated, as investors have been buying with Tether and not with actual US dollars. What does all this mean? If the accusations are true and Bitfinex doesn’t have the dollar reserve to support the amount of Tether tokens in existence, things could get pretty ugly.
Is There Any Hope For Bitcoin on The Horizon?
That depends what angle you examine it from. There are still some analysts positive about the ailing cryptocurrency future. Wall Street’s Tom Lee, the only major strategist to issue Bitcoin price targets, commented that this major low for Bitcoin represents the biggest buying opportunity of this year. He further issued a report maintaining his target price of $25,000 for Bitcoin.
Saxo Bank analyst, known for predicting the crypto rally at the start of 2017, Kay Van-Petersen also told CNBC that he believed Bitcoin could still hit between $50,000 and $100,000 this year.
Whether these figures are to be believed or not remains to be seen, but one thing is for sure. Crypto investors and ICOs will be biting their nails around the globe as the roller coaster gets set for further intense highs and lows.