Cryptocurrency drop explained & why I expect it to drop further
By: Petros Leandros
Tags: Technology, Blockchain, Cryptocurrency, Ethereum, Bitcoin

It’s been a while folks! Counterintuitive isn’t it? Seeing an article suggesting a further drop in the Cryptocurrency market from a pro-Blockchain & Crypto guy is not what you would expect. My opinions over the long term viability of the solid projects associated with the technology are not altered (check the rest of my articles for more details around this), and in fact, I do consider the recent drops in the Cryptocurrency Market Cap to be positive for the long term potential of the sector. However, I do expect an even further drop in the Cryptocurrency Market for the short term. If you do not want to lose your investment, do read further!

Market Capitalization of the Crytocurrency Market, courtesy of Coinmarketcap.

Regulations, Regulations and even more Regulations

Looking at the Cryptocurrency Market Capitalization chart above, shows a scary picture — from the market peaking at $820 billion on 7th of January, to dropping as low as $400 billion by the 2nd of February, we are talking about a more thn 50% drop in less than a month. Why did such a drop occur?

As the title says, January has been a month where heavy regulatory pressure from governments has befallen Cryptocurrencies. From closure of exchanges in South Korea which do not comply with certain rules, to banning of Cryptocurrency trading in China and quotes of the Indian Finance Minister showing a negative stance of the Indian government towards Cryptocurrencies, has resulted in such a huge drop in the Market.

As regulations result in more taxation of Crypto gains, less anonymity and more scrutiny it is normal that Cryptocycurrency traders are not reacting favorably to such news, and are quickly selling their coins to invest them in different asset classes.

Will the Market drop further?

Even though nobody can predict the future, I do expect the market to continue dropping in the short term. The reason is, that announcements of further regulations regarding Cryptocurrencies are expected to keep on coming. In the World Economic Forum at Davos that occurred last week, the US and UK Governments clearly expressed that they are planning on regulating Cryptocurrencies. And as recent history shows, this is going to have a negative effect in the market.

Will the Market ever recover?

With that being said, I do expect that in the long run, the solid Crytocurrency projects do have a future. As the market becomes more regulated, its legitimacy will increase and become more mainstream, allowing investors that are initially skeptical to join the market.

The End of the Beginning

To summarize, I do not expect that the market will instantly recover from the drops that it has suffered in January. Even if it does, I expect it to then soon retract to lower levels than it is today. Will that be the end of Blockchain and Cryptocurrencies? Definitely not, it will only mark the beginning of the asset’s widespread adoption.

What is your take on the future of the Cryptocurrency Market? Feel free to share your opinion in the comments section or in a personal e-mail. Also, if you liked the article, don’t hesitate to share it with friends and family.