With the recent problem of liquidity in cryptocurrency, quite a lot of people have their live savings wiped out.
So are we seeing the end of the crash?
Or we have not seen the end of the collapse?
For those who are heavily in cryptocurrency, there are lessons we can learn.
If you read the financial news in the last few weeks or days, all we encountered were shortage of liquidity in the crypto exchange.
One of the biggest exchange based in Singapore had to go into liquidation, after the Monetary Authority of Singapore reprimanded them for giving false information last month.
As the result of which, that crypto hedge fund plunges into liquidation and we are yet to see the financial impact.
For the l;last few weeks, the global digital assets’ sector is facing strong head wind after breakneck speed of growth.
Due to the breakneck speed of growth, a lot of investors decided to jump into the bandwagon and ride on the wave.
During the last few years, the growth of the global digital assets’ sector was amazing, a lot of cryptocurrencies exchanges platform were up and running.
However, no one seemed to care there was a serious lack of regulation to monitor and regulate the transactions in cryptocurrencies transactions.
How do we know which exchange platforms can be trusted?
There are so many cryptocurrencies exchange platforms nowadays, and there are also so many types of cryptocurrencies on the market at the money.
There are too many until one can not decide which one is the one we can rely on.
Are they regulated and by whom?
though governments all over the world tried their best to regulate cryptocurrencies, the problem is there are too many exchange platforms pop up everywhere and each claimed its own legitimacy.
Without knowing the full details of the one who is running the exchange platform, and just base on friends’ recommendation just because he or she has been using the platform, then the cryptocurrencies hype grow.
We will only know there is a problem when someone who tries to cash in and liquidate his position find out he is not able to do so, or the money he tries to cash out does not seem to come into his bank account promptly.
Then when he tries to call, then only realize you can only do so by contact the exchange online, the reality sinks in when he realizes that he is dealing with machine or robot.
Evolvement of cryptocurrencies.
Cryptocurrencies were supposed to be the alternative for money currency and note.
Instead of using monetary note to purchase goods and for consideration,
Cryptocurrencies especially Bitcoin, when it first started, it was supposed to replace the normal money note as the consideration of exchange of goods or services.
However, somehow it seems it became an investment instrument instead of the alternative of money notes.
Bitcoin has fallen from the high of US$67,000 to its current level of US$ 20,000.
The collapse of cryptocurrencies caught investors by surprise, and people are wondering whether we have seen the bottom of it.
is it the same as the crash of the DOTCOM case in the 2000?
The dotcom crash was due to the rapid rise of the US technology stocks fueled by the investments in internet based companies in the late 1990s.
The internet based companies hype made opportunists investors jumped on the bandwagon and rode to richness, so they thought.
Then the reality sunk in and the bubbles burst, especially when the element of speculation came into play.
So it seems we are seeing the same thing for cryptocurrencies hype, every one is rushing into this sector just like in the late 1990s.
At the beginning, we only had Bitcoin, then when people saw how fast Bitcoin value rose, investors rush in and companies being formed and new cryptocurrencies being issued.
Now there are so many times of cryptocurrencies, resulting in so many choices for investors.
It seems that history is repeating itself, with people rushing to form new cryptocurrencies and so on, just like the DOTCOM case when every one rushed to form new start up and so on.
During the DOTCOM crash, we had a lot of venture capitals funding the new startups, the same thing is happening in this cryptocurrencies case.
With capital markets throwing money in this sector, the game is very much different and every one is rushing to grow big and trying to capture the market.
It resulted in we are not able to identify which is speculative and which is genuine investment.
to make the matters worse, scammers also dip their hands into this and make some killings for their own purposes.
So, do we still invest in cryptocurrencies?
Just like the DOTCOM incident, after raining, sun shine.
Those who have the lasting power or having some extra in the reserve, can wait for the storm to blow over and start investing again in this sector.
Hopefully by then a proper regulatory body is in place to make sure proper accountability and transparency in this sector.
Perhaps, something along the line of stock exchanges like the DOW JONES or other exchanges, where you want to have your counter listed, you must go through certain scrutiny and meeting some strict criteria, then only the cryptocurrency is allowed on the exchange.
Then perhaps we need to have a proper exchanges instead of what we have where anyone who has some extra can form an exchange and allow trading on its platform.
The most thing to bear in mind is to eliminate the speculative investment in this sector and also filter out the scammers.
Anyone who wish to share his experience in this sector, please feel free to put in your experience in the comments section below.