Bitcoin has had a rough 2018 so far, plunging to a mere 50% of its 2017 peak, and other coins, such as Ethereum and Ripple, have seen double-digit losses compared to their bullish heights from last year.
More recently, we’ve seen the collapse of BitConnect, an anonymous exchange that’s been repeatedly accused of operating a Ponzi scheme through its own currency. In the last weeks, South Korea banned ICOs and anonymous cryptocurrency trades, and China banned crypto entirely.
Chinese authorities had already banned ICOs and shut down exchanges operated in the country, but that failed to prevent people from accessing foreign exchanges. So the Chinese Communist Party did the only thing they seem to know how to do, they blocked access to “unwanted” foreign websites, using the “Great Firewall of China.”
South Korea is considering easing a ban on ICOs enacted in September, with the country’s Financial Services Commission announcing the ban may be lifted in part, specifically for tokens that meet yet-to-be specified conditions.
Viewed separately, these events might seem like merely symptoms of the volatility of crypto markets, however, when taken together, a growing tide of global regulation begins to appear. In the US, regulation has reared its ugly, centralized head in the form of the SEC, who has clamped down on ICOs, conducted an investigation of the embattled PlexCorps startup and issued warnings on cryptocurrencies to investors.
This international movement toward tighter regulation has been suspected as the driving force behind the loss of value that has gripped cryptocurrencies in recent months. It would also potentially account for BitConnect’s collapse, which came about shortly after receiving cease and desist orders from state agencies in Texas and North Carolina.
In November, Business Insider reported that “pump and dump” scams — where cryptocurrency values are artificially inflated by orchestrating large scale purchases of coins — were “rife” on the Bittrex exchange. Additionally, Bitfinex, the largest exchange by trade volume, acknowledged market manipulation had occurred on its platform in August, when it revealed that Bitfinex staff had detected multiple accounts engaging in “large-scale manipulation tactics.”
Many users on the image-sharing site 4chan believe the market manipulation discovered on Bittrex and Bitfinex is just the tip of the iceberg, and several of them are staking their livelihood on it. One user is investing their entire savings, amounting to $22,000, as well as a $15,000 loan on shorting TSLA. Another is cashing in 3 Bitcoins ($27,426 USD) and investing in shorting the coin.
And they’re not alone. Dozens of users on 4chan and the somewhat-lesser-known 8chan are discussing their plans to short Bitcoin and other cryptocurrencies, citing what they believe is an impending crash of crypto markets that would make January’s losses look trivial in comparison.
If the SEC and other regulatory agencies commit themselves to fighting fraudulent trading practices, and admitting that such practices have been at least partially responsible for Bitcoin’s staggering rise, then Bitcoin, and cryptocurrencies in general, may very well struggle to regain the kind of values seen in 2017.
Not only will the pump-and-dumpers and shills responsible for manipulative trading be inclined to sell off their ill-gotten gains and move on, but an increasing number of investors will get the notion that the cryptocurrency market is fraught with criminal activity, and needs to be reigned in by regulators. Coupled with large-scale selloffs and shorts orchestrated by 4chan users, the Bitcoin “bubble” could potentially be on the verge of bursting.