A fear is created because of FUD which stands for Fear, uncertainty and doubt why? Actually it has several influencing reasons and they all do count and play a significant role in creating, increasing and spreading the Fear.
Traditional financial institutions resistance: The most important factor creating uncertainty comes from banks, stoke markets, hedge funds, venture capitalists, they all are indeed in an agony. Every day using mainstream media they are spreading tons of disinformation and negative news. Threatening, demonizing, discouraging people from buying cryptocurrencies. This strategy works very well. They use terms like this market is in a bubble, this market is fraud, Ponzi schemes, it will burst soon, will collapse and etc. They keep discouraging people and narrative is always the same. On the sake of customer’s interests protection gigantic propaganda machine is involved in spreading disinformation.
Personally I don’t care about a bubble. Everything is a bubble, when it comes to rapid value appreciation of an asset, news always portray it as the bubble, because people’s opinions are different and they see and analyze things differently, they all have their own opinions, different perspectives and expectations, using different measurements, own judgements. Every asset is under a speculation and appreciated differently, some of them are overvalued, some of them are undervalued, it is very natural phenomena and always very hard to calculate fair price of an asset. Expectations and perceptions creates the expected value in the speculated market and it is very normal, that is how the price is formed and that is how this market works. Maybe this expected value is unnaturally higher than real value of the product and price seems artificially increased, but this is how it is regulated by a market. When it comes to the appreciation of value of something and price creations, perceptions are more important than facts in this market. For example my favourite project is Cardano led by a Brilliant Visionary leader - Charles Hoskinson. I just believe in his vision, talent and personality and very strong team. Imagine if this bubble bursts tomorrow and market would crash. Undoubtedly, for some time there will be shock, depression, lots of weak coins will fail and vanish from radars, but after some period market will form a new judgment, again re-evaluate the new value of products, come up with new stand points, new vision and definitely show will go on Because of the current market crash, Cardano, with its amazing team, vision and researchers wouldn't disappear in the fog. I deeply believe that it would be the same with all amazing, solid and innovative projects that have brilliant minds behind them. One way or another show will go on. Let consider another example, if crash happens on the stock market and shares of Google, Facebook, Amazon, or some well-established, gigantic corporations will drop drastically because of overall market crash and depression, should it be considered as final collapse? Devastation of these companies? Funeral? Would it be end day? Of course not, after some time, which always is needed for re-evaluation, market would start recovering, come up with new regulations, judgments and all companies who has real trust and value would recover stronger to the previous states or maybe even exceed them. This is very fundamental and natural phenomena of a development process.
When it comes to the involvement of Wall Street guys and venture capitalists in crypto trading, notwithstanding the fact of their official sceptical position, one should be mentioned that they are already here. They are just criticizing and threatening ordinary people to restrain from buying cryptocurrencies, alerting them not participate in crypto markets, as if they worry so much about ordinary peoples financial loses, meanwhile, in contrary they anonymously have become aggressive crypto whales. If you ask them they officially hate cryptocurrencies, but on the other hand because of huge gains investing in cryptocurrencies. Truly paradoxical situation indeed...
Regulatory uncertainty: Governments have different approaches. Some of them and most progressive ones are embracing this new amazing technological changes, but some of them don't. They don’t appreciate and understand the true, disruptive nature of the blockchain technologies. China for example, maybe after South Korea in my opinion is a real champion in banning everything what is not strictly controlled by the Chinese Government.
If we don’t take into account someone living in rural area who doesn’t have sufficient information, knowledge about internet Web 3.0, is indecisive and can’t make proper decisions, even some Governments find it difficult to make decisions and are looking for the examples of the other states, looking for what other states will do, how they will handle with crypto market regulations. That is a big reason why lot of traditional investors are afraid to put money in the cryptocurrencies. They can’t bear with ambiguity, indistinctiveness, they don’t like uncertainty.
Security issues: We keep hearing different stories about hackings. Every month there is some kind of story that some exchange was hacked, 100 of millions have been stolen and stuff like this. This is truly frustrating, for investors causing fear and uncertainty in crypto market, indeed terrible sense, because no one wants to lose their money. People want to be sure that their investments are safe and secure. These considerable threat is very serious so actions should be taken from investors in order to safely store assets. We should trust just top exchanges and increasingly use cold wallets for long term holding cryptocurrencies.
Government fears and interests:
First and foremost government’s interest is to implement Anti Money laundering policy: They need to be sure that money which are entering in crypto space is legally generated, possessed and not illegally obtained money. So criminals, money launderers, terrorists or drug dealers can’t use crypto markets to hide illegal money. In some countries this is a real issue, I would say a significant problem.
This fear is very legitimate and understandable for me, personally I don’t think anyone will be against of additional levels of transparency beside some radical anarchists, because obviously terrorists and criminals shouldn’t be able to move money freely, comfortably, without of fear getting caught.
Fiscal issues, taxation: from every Governmental perspective income generated from economic activity should be taxed. Legitimate question - So why shouldn’t we tax gains generated from crypto trading?!
There is absolutely no reason for not doing so. No one argues, fair enough. From my point of view regulations are essential for sustainable development of cryptocurrency market without doubt. Moreover, it will boost and accelerate the development process and bring some additional degree of certainty because law abiding citizens who are afraid and curious what will happen will feel more confident and safe to put money in cryptocurrencies when they will know that crypto space is regulated.
Customer rights protection, KYC side, ICO’s. (How regulators interpret and see tokens? as securities? or as utilities? Who have a right to offer? Who have the right to participate?) During this ICO boom period there have been a lot of fraud, scam, cases in untrustworthy coins and some people really got in big trouble and saw significant financial losses, because of lack of knowledge.
It is considerable issue, maybe even threat, but, we should be aware that this kind of stuff happens everywhere, anytime, with everyone and not just in the crypto market. If someone poured tons of money in a bad project and thrown it in the garbage, it is completely his or her fault, they are responsible for behaving foolishly. Repercussions are the same in other investment spheres as well. So before investing in cryptocurrencies everyone should do their own research, read a white paper, look at the project, concept, team, their background, deep dive into technology they are using, vision they have, pain they are solving and only after rigorously research and analysis make investments. Smart investors choice is rational, is always based on meticulous research. Only deep comparative analysis of the projects makes them more clear, understandable and distinguishable.
Because of the facts and arguments mentioned above, some people are afraid, confused and can’t make decision to invest, or not to invest that is a question :)
That is why for newcomers it is not easy to navigate and swim in this ocean of uncertainty and that is why some people feel sceptical entering in the crypto space.
The good news is that it won’t last long. Personally I am very bullish about bright future of blockchain based on technologies and deeply believe that we are on the edge of transformation and changes. Technological advantage of the blockchain based technologies as a purely more advanced systems comparing with traditional centralized corporations which are always standing between us as middle man and sucking tons of money from our pockets are so evident, that inevitably It will take some time for mass adoption, but finally superior technology will win, find its way, no one can resist the technological changes which are already here. Time has come we should change our attitude towards dealing with things, re-evaluate, rethink the value of money, the value of assets. We should change the way of thinking, we should go out of the box and look far beyond tomorrow… there is indeed more fear, comfortable and individual’s interest-oriented future for everyone. Humanity must go to the next level of development and get rid of aged, outdated methods and things. Incredible changes are awaiting us, we should embrace it, grab the chance and move forward. This is indisputable.
The opposite question is why we should stop participation in development? Why we should forget historic chance to participate in new emerging companies, some amazing, truly disruptive ICO’s? There is no magical reason why on earth not to do this if you really believe in the Idea and team behind it. If someone will give me one good reason I will think carefully about that, but there is no reason, incremental evolution is the norm, rule of nature and it can't be stopped or ignored. One way or another this technology will find its place and gain mass adoption. It is unstoppable. So don’t hesitate for ages, appreciate the future and quickly jump on the train. Time has come for paradigm shift which in the dictionaries is described as a fundamental change in approach or underlying assumptions.
All information mentioned above is my personal opinion and has nothing to do with investment advice. Inspiration for this article become my friend’s curiosity what was the reason of current volatility in prices. I started writing and come up with this humble analyze :)
Giorgi Avaliani 02.07.2018.