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Another day, another Cryptopocalypse. Cryptocurrencies took a huge dive in the last little bit, on news that Korea would be looking at regulating the digital currency sphere. At the same time, Bitconnect announced it was shutting down, and heading for the hills, with a hearty “So Long Suckers!”.

As some wag said to me, “Who knew an Internet currency based on nothing could show such volatility?!”

Chickens and Roosts

Today much of the financial establishment is getting its rocks off tut-tutting and nodding sagely while saying I told you so.  Conversely the Crypto world is split between hair on fire freakouts and the faithful saying HOOOOLD! (Or HODL if you are one of the cool kids)

First off – let me make a very important point about today’s losses in the crypto market. The losses today put BTC back to where it was about 1 month ago. In contrast the big 2008 wipeout set the stock market back 10 years.

That is to say, this isn’t a burst bubble, but a contraction. If there’s going to be a big blowout it’s coming in the future. This was a hiccup.

That being said, this ‘retrenchment’ although not the Cryptopocalypse, does shed some light on issues with investing in this area. Even leaving aside the inherent risks in a volatile market like this one, the Wild West nature of this stuff means you need to have your wits about you.

Bitconnect bites the dust.

So It turns out, major exchange player Bitconnect was  allegedly all just a ponzi scheme. With things tapped out, the founders took their profits and shut the whole mess down.

These guys were lending and mining their own crypto and they claim after all the trouble with dDos attacks, and nasty hackers etc. They can no longer support the BCC platform. (Their own Crypto currency). Effective immediately they are out of the lending and currency biz, but will host your wallets, (so nice of them). I’d get any assets out of their hands ASAP.

So, unrealistic returns on investments, no actual profits, and an entire cryptocurrency goes ‘poof’.  Sounds bad to me.

The CEO and his merry band blame bad press and hackers. I blame greed, hype and willful blindness.

The folks at /r/Cryptocurrencies have a scary long list of bit connect supporters and other potential crypto-ponzis – the sheer number and breadth of these sorts of operators is staggering. (I would note for the record, no EG clients are listed 🙂 )

In a world where you can triple your stock by adding ‘Blockchain’ to your name, it’s very tempting for the worst of the worst to take advantage. If it’s raining soup, you grab a bucket.

All this to say there is a lot of potential in crypto, including blockchain tech companies, miners etc. The spike in BTC and crypto make it harder to see when something is too good to be true, but trust your gut. If Due diligence isn’t your cup of tea, I’d like to interest you in my new venture, DigiSuckerCoin (NOT AN ACTUAL SOLICITATION – ed.)

Korea and Crypto – Ground Zero for government intervention?

A while back I mentioned Vietnam would be regulating BTC and crypto. At the time I thought it might be an interesting test case for the ability of traditional governments to regulate digital currency.

Right area, wrong country.

Korea is the centre of the crypto storm. The Koreans are in love with all forms of Crypto. They have made it a national pastime like StarCraft, or melodrama. In December the government introduced new regulations as a first step to take some control back.

As of yesterday, 200K people have signed a petition asking the Korean government not to kill the ‘Happy Dream’ of Bitcoin.

This whole slide was apparently triggered by the Korean Finance Minister said he was still musing whether or not to shut down the country’s exchanges.

The Bitconnect debacle likely isn’t going to reassure him much.

The markets are very nervous about government regulation in Cryptocurrency. We can talk about decentralized nodes, anonymous intranets etc, but at the end of the day, the governments of the world still have the guys with guns who can cut the power to your servers, factories, communications links etc.

That’s still a force to be reckoned with even in the digital age. Besides, even if you end up a cool cyber-outlaw with a mohawk and the scalps of tax collectors hanging on your belt, it won’t help you spend your bitcoin if no one wants it in exchange for say, bread, ammo or gasoline.

On the flip side, it’s still true the blockchain tech and some of the more established cryptocurrencies will not go away any time soon. What’s uncertain is how much pressure or control the older financial systems can bring to bear on this new market.

(hint: A LOT)

So when a government publicly comes out wanting to dink around with bltcoin, people freak out, because there are a lot of unknowns here, needing to be shook out.

Keep Calm and Crypto On

 

Fundamentally, nothing has changed about BTC and other cryptocurrencies. This is a bleeding edge market with new rules. Like the early days of the stock market, insurance exchanges or other financial innovations, it’s gonna take a while to set those rules.

I’m on record as predicting valuations of BTC one day being completely insane. (Come for the tinfoil hat, stay for the jokes) But there will be a lot of bumps in the road.

As with anything else, this is a big risk vs. reward game for big boys and girls. If you can’t take heart-stopping volatility, get out now. If you have crypto in your portfolio, today is a good reminder to make sure you haven’t bought into any stinkers or potential Bitconnects.

The last few days aren’t the Cryptopocalypse. It’s a minor hellmouth at best.

The best and worst is still yet to come.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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