Investors are afraid. And the sale crashed the crypto. But this is a market driven by the headlines. And dips are normal when headlines don’t paint the most appealing images … Even when they’re half-truths.
The crypto began its recent withdrawal after Elon Musk rescinded his promise to allow Bitcoin as a payment method for Teslas. But a man doesn’t move the marketsâ¦ Even a man as influential as Musk. This tweet heard around the crypto worm was quickly followed by a disruptive headline from Reuters:
China bans financial and payment institutions from engaging in cryptocurrency business.
Considering that China is one of the leading countries this crypto trade, it is no surprise that a title like the one above would send ripples into the crypto markets. But the title didn’t really capture the whole story. In fact, it was more misleading than anything else. Here is the real scoop we got from crypto expert Andy Snyder.
Well, that’s not exactly news. What has happened is that a few Chinese watchdogs have issued a warning about the speculative nature of crypto. This is nothing new.
In fact, no new laws or rules have been adopted. The agencies simply reaffirmed the laws in place since 2013 – when Beijing announced that Bitcoin was not a real currency and that financial institutions could not deal with it.
Despite the clarification, this was not enough to bring prices close to all-time highs. More sales crashed the crypto even more. And even more bad news followed …
More news to send crypto crash
In a long series of tweets, Caitlin Long, CEO of Avanti Bank and Trust – which specializes in digital assets – uncovered an astonishing revelation about the world’s largest stablecoin.
It turns out that most of the US dollars that the Tether stablecoin was backed by actually consist of âcommercial paperâ. This was a major revelation because commercial paper is a riskier asset than treasury bills. You can read Long’s analysis in the thread linked below.
– Caitlin Long ð (@CaitlinLong_) May 15, 2021
Here’s the long and the short: Tether’s default possibility suddenly increased dramatically. Institutional investors did not like this at all. And to reduce exposure, a massive sale took place. And because of Tether’s increased risk, many portfolio managers have had to reduce overall crypto exposure by selling non-Tether tokens as well.
If that’s a little hard to follow, let’s lighten the load with an even more recent comment that crashed the cryptoâ¦ Or at least foiled its rebound.
Former President Donald Trump weighed in on the crypto hype. This little news bite is pretty easy to follow. In a Fox News segment, he said, “Bitcoin, that sounds like a scam.” Nothing really revolutionary there. Then he explained that he doesn’t like it because it’s another currency that competes with the dollar. And he wants the dollar to be the currency of the world.
Unfortunately, this is not how monetary policy works, but the point is taken. And like thatâ¦ another shot fired at the crypto markets. A sort of hacking of a group of hackers followed …
Bitcoins get gassed
Remember when people filled grocery bags and trash cans with gas? When the Colonial Pipeline was shut down due to a ransomware attack, some people panicked. This is almost understandable anyway. It is the largest refined petroleum pipeline in the United States. It is responsible for delivering three million barrels of fuel per day between Texas and New York. Still, many East Coast residents have proven that they haven’t learned anything from the dire toilet paper shortage of 2020. The horde is American, I guess.
However, before many people could even fill mason jars and pickup beds with gas, Colonial Pipeline paid the price. 5 million ransom. What does this have to do with the crypto crash, you ask? Fast forward a month later, and the FBI smeared the hackersâ¦ And much of the ransom paid to Russian hacker group DarkSide in the form of Bitcoin has been recovered.
It could have been a great act of justice. But the news rocked the crypto markets. Is Bitcoin not safe and secure? Is it easy to compromise a crypto wallet? Is cryptocurrency much easier to follow and grasp than we thought?
At this point, the answer to all of the above is most likely no. If we were the type to bet, the smart money would be that the FBI carried out a social engineering hack. In other words, they tricked someone into getting the information they needed to access an account with around 63.7 Bitcoins in it.
According to a deputy special agent in charge of the FBI’s office in San Francisco, the funds were specifically seized from contractors of hackers who had used DarkSide ransomware to hack Colonial. In other words, the hackers left a trail. And they were tricked into granting access to their crypto account.
Will crypto continue to crash?
The latest news to send a crypto crash still has unanswered questions. But that’s by design of course. And this uncertainty still shakes many crypto investors.
Elvis Chan, this FBI agent referenced above declined to give details on how they gained access to ill-gotten Bitcoin. He only mentioned that the office didn’t have to wait for the ne’er-do-wells to use crypto services in the United States. “I don’t want to give up our trade in case we want to use it again for future efforts, “the agent said NBC News.
We are unlikely to know more about how the FBI got their hands on the stolen crypto anytime soon. And that risks leaving additional pressure on already stressed crypto markets. But that too will pass. A long string of bad news and negative headlines crashed the crypto. But eventually, this news will fade. Crypto will rebound. And then it will crash again. And it will bounce back. It is the natural ebb and flow of markets.
Bitcoin has already stood the test of time. He’s not about to suddenly disappear. And it is more or less conceived as competition against the dollar. Sorry, President Trump. But most cryptos are not. Most coins – at least the ones worth investing in – have inherent value and use.
Internet Computer (ICP) has designs on decentralizing the Internet. Telcoin (TEL) wants to change the remittance industry. Filecoin (FIL) creates a new way to store and share data. The list goes on …
With the news of El Salvador officially approving Bitcoin as legal tender – and several more on the way to follow – we hope to see an end to the latest ebbs in the crypto market. After all, it would be nice to end the crypto crash. But it gives people a lot of opportunities to buy the drop.
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