How the cryptoeconomic market is impacted by regulations

How the cryptoeconomic market is impacted by regulations

Without questions, 2017 was the year of the cryptocurrencies, since most of them skyrocketed, especially Bitcoin. The flagship digital coin started the year below the $1.000 USD threshold, but soared to almost $20.000 by mid-December.

Thanks to that fast-paced growth, digital assets started gaining the attention of many people, most of them investors willing to ride the wave towards a quick profit. But it also increased the government’s interest to learn more about this new economy.

Financial regulators began to ask questions to get a better idea of how important the cryptocurrency trade was: How does it work? Where does the money comes from? Where does it go? How do people make a profit or lose money?

Despite a mainly upward trajectory, the cryptoeconomic market is still susceptible to unpredictable and, sometimes, extreme price fluctuations. That’s why the efforts to impose regulations are a main factor in the market stability.

Regulators may be acting with the best of intentions, looking to protect the investor’s money from frauds or hacking, but the cryptocurrency value remains closely related to speculation and optimism.

This is why radical political changes can severely impact the long short term direction of the market, as proved by many examples last year.

One of these examples was China, currently the world economic trendsetter. Las September, Chinese regulators announced a ban on Initial Coin Offerings (ICOs) and shutting down domestic fiat-to-crypto trading.

This prohibition was one of the hardest hitting factors on the market, but it didn’t stop the digital currency exchange and the operators found new ways to continue negotiating digital assets. That’s why, to this day, Chinese Exchanges keep growing.

As a matter of fact, two of the biggest Exchanges in China, Huobi and OKCoin, are already in the World’s Top-10 in  trading volume, even though they trade exclusively cryptocurrencies.

But that’s not it. Huobi has continued to expand its operations to other countries that lack the regulations it has at ‘home’, opening Exchanges in Hong Kong, Singapore, South Korea and the U.S. To this day, Huobi has almost 3 million users, and more than half of them are not in China.*

The point is this: Due to the decentralized nature of cryptocurrencies, most people think regulations may hinder its growth, but the reality is that, best case scenario, they may well decrease the volatility that has characterized the industry.

But what is really important is that many people now recognize the Blockchain –the underlying technology that supports cryptocurrencies – as a vital component for the future of the global economy.

 

By Alejandro Cortés

*Source: Coindesk

  • Alejandro Cortés

    Alejandro Cortés

    Egresado de la Escuela Mexicana de Periodismo Carlos Septién García. Ha trabajado para varios periódicos en México y los Estados Unidos desde 2002.

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