23 Jan The Cryptocurrency Bubble is Likely to Burst According to Analysts
Cryptocurrencies started gaining investors’ attention since the first quarter of last year when several companies announced their interest in blockchain technologies. Consequently, the total market capitalization of cryptocurrencies increased from $30 billion to $832 billion in less than a year.
With the potential to instantly transfer money from one place to another, investors have moved billions of dollars using these digital currencies, raising regulators concerns over the fast movement of money.
Thus, several countries have been taking strict actions against the speedy movement of cash through cryptocurrencies. For instance, South Korea has announced new taxes on cryptocurrency trades and they are planning to take hard regulatory actions.
On Monday, India announced that it would be suspending cryptocurrency trading accounts in order to discourage virtual currency trading.
According to reports, investors have made $3.5 billion worth of transactions through cryptocurrency trading in the last seventeen months. Previously, the Indian finance minister issued several warnings against cryptocurrency trading.
Cryptocurrencies have been falling over the last two weeks due to regulatory concerns, wiping off almost $318 billion from the total market capitalization.
Several analysts, including Goldman Sachs (NYSE:GS), believe the cryptocurrency bubble is likely to burst sooner rather than later.
Today, Goldman Sachs has warned its biggest clients to avoid participating in cryptocurrency trading. Moreover, Goldman Sachs thinks cryptocurrencies have already moved beyond bubble levels when compared to the Tulip mania of the 17th century and the dot-com bubble of the 1990s.
“The mania surrounding cryptocurrencies is probably even better illustrated by the price surges seen in companies that announce some type of affiliation with blockchain technology or cryptocurrencies,” Goldman Sachs wrote.
Along with other regulators, International Monetary Fund (IMF) has raised its voice against the potential threat of the terrorist funding, money laundering, fraud, and tax evasion with the help of digital currencies. Although IMF asked for global cooperation for regulating cryptocurrencies, IMF has also warned investors about crypto trading amid the massive growth in prices.
An IMF spokesperson said, “When asset prices go up quickly, risks can accumulate, particularly if market participants are borrowing money to buy. It’s important for people to be aware of the risks and take the necessary risk-management measures.”
Featured Image: Twitter