Crypto Capitulation Is Upon Us

From their December peak, cryptocurrency assets have given back over $400 billion. This amounts to more than the GDP of many countries. If this were values lost in the stock market whose worth is in the trillions, it would be called a minor correction. In crypto terms there is only one word to describe the carnage: capitulation.

As painful as it is, the point to be made here is the capitulation is a good thing. Read on and I will share some thoughts for you to consider.

Mass Media Mania
First let’s take a look at some of the news that is causing such despair. Most recently the selling mania has been in response first to Facebook and more recently to Google. Both of these mass social media giants have ban cryptocurrency advertising. Read closely and you won’t be shocked to realize that the target of their ire are the many ICOs.

The problem is not that Facebook and Google are the only advertising platforms. The problem is that they are considered mainstream media and without these two, the trend of cryptocurrencies gaining legitimacy is delayed. That is right, I said delayed not blocked or prevented.

The World Has Changed
Five years ago, when bitcoin was unknown to most people, this might have been a fatal move. Today is a different story. I recently traveled to a remote mountain town in the interior of Mexico. Everyone I met had heard about Bitcoin and eyes lit up with excitement when I ask if I could pay for lunch with bitcoin.

Today are dozens of websites dedicated to cryptocurrencies, either holding them, exchanging them or just writing about them. Probably the most effective advertising remains on Google, it is called Google Search and it is free.

If someone wants to learn about owning bitcoin or any other currency, there is a ton of educational information.

Of course it would be far better all around if Mark Zuckerberg and Eric Schmidt had taken a different approach such as banning only advertisements for ICOs, but that didn’t happen so supporters of crypto aren’t comforted in their beliefs that bitcoin is going mainstream in 2018.

The Flipside Is Being Ignored
Every argument has a flip side. If the removal of ads contributes to cleaning up ICO scams, that is a good thing. We can all agree on that point. And let’s be honest there is more than one problem the crypto community needs to clean up.

This adds to the ongoing regulatory news including March 7th ruling in US Federal District Court that cryptocurrencies are commodities. As such they can be regulated by the Commodity Futures Trading Commission (CTFC).

On the same day the Securities & Exchange Commission issued the following order:

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the commission said in its “Statement on Potentially Unlawful Online Platforms for Trading Digital Assets.”

Not All Regulation Is Inherently Bad
The mere hint of added government regulation typically sends stock market investors heading for the exits and the same holds for investors in crypto. But this raises the question, is some regulation of crypto a good thing?

If we examine the full spectrum of regulation to this point on a global scale there is one common target most everywhere. That is the practice of exchanges. So far there has been little or not regulation, threatened or enacted, to protect investors from loss of funds due to security breaches.

The question that needs to be ask is this. Will SEC regulation result in better pricing and lower trading costs; if So, then this would provide a desirable outcome. It is understandable if you laugh at the prospect of any government regulation having a beneficial outcome, but if you look at past SEC practices, you would come away with different conclusion.

So when the next regulation catches the headlines will it be to ban the existence of bitcoin, Ethereum, Ripple, Litecoin and others or to protect the investor from scams and excess costs?

Capitulation Is A Good Sign

Over the course of a pretty long investment experience, I have witnessed true misery on more than one occasion. The pain is unbelievable, there is no perspective on the future and all you want is to take action to end the misery. That is when you know the worst is happening and nothing is ever going to make it better. That is when major stock market bottoms are formed. It surely is painful these days for crypto investors. This is a good sign.

Until next time