Innovation moves in mysterious ways. Cryptocurrency represents what is still a relatively new technology, and its growth is continuously being affected by outside factors – including both advances in blockchain technology and also, on the legal side of things, the rush to keep up with regulation and legislation.
Following a market-wide surge in value and investments around 2020 to 2021, the cryptocurrency industry took a widely reported nosedive in 2022 – with rates crashing through the floor and bringing on the beginning of what many would come to call the “crypto winter”. However, in the first months of 2023, we have seen tentative signs that the market may be back on the rise.
Over the past five weeks, Bitcoin has risen again by 30% in value, while the current wildcard to watch is the appearance of numerous new AI-backed cryptocurrencies on the market… Some of them achieve extraordinary growth rates in just a few weeks. Nevertheless, cryptocurrency is very much a boom and bust industry – and for every success story, there is also a crash.
In this article, we will take a closer look at a few recent “busts” in the crypto space… before putting these events into perspective to show that in the big crypto picture, the occasional crash might just be the tell-tale sign of healthy future growth.
The End of LocalBitcoins
The latest of these crashes being reported relates to LocalBitcoins. This Bitcoin exchange has been running for 10 years now, becoming a recognisable name in the industry. However, it was reported in early February that the exchange would be closing, with insiders citing market conditions as the inevitable reason for its downfall. Put another way, LocalBitcoins will have been one more victim of the crypto winter.
LocalBitcoins is based in Helsinki, and it has been one of the longest-running exchanges in the industry. Over the past decade, its weekly trading volume has seen peaks of as high as $100 million – for example, in 2017, according to CoinDance – though in the past four months, that figure has more generally been floating between $5 million and $7 million per week.
One of the strengths of this particular exchange was its adaptability. LocalBitcoins offered peer-to-peer services and an escrow feature for users to buy and sell their currencies. It enabled traditional bank transfers, or alternatively; users could agree to cash deals, making this one of the more flexible and appealing exchanges on the market at that time. Not that its record isn’t without blemishes. A dubious Bitcoin-selling business that used LocalBitcoins caused controversy back in December, and Ian Freeman, an activist and an early bitcoin pioneer, went on trial for his alleged connection to the scheme.
Now, a statement from LocalBitcoins has been released in which they acknowledge that “regardless of our efforts to overcome challenges during the ongoing very cold crypto-winter, we have regretfully concluded that LocalBitcoins can no longer provide its Bitcoin trading service.”
The announcement specifies that the exchange will cease trading on 16 February. Following this, there will be a grace period during which existing users will be able to log in and withdraw any currency they currently have on the system, then after that, the LocalBitcoins exchange will be discontinued for good.
The Closure of Bitfront
It was not that long ago that a similar story was making the news. Only in November 2022, the California-based crypto exchange Bitfront was making similar statements to those we have just seen from LocalBitcoins.
Bitfront was a US exchange, but it had backing from Japan, specifically from Line Corp, a Japanese social media firm.
In an announcement last November, the exchange stated, “despite our efforts […] we have regretfully determined that we need to shut down BITFRONT,” and they explained that this move came as a result of the company narrowing their focus to work solely on growing their blockchain ecosystem and token economy. New sign-ups were promptly suspended, and transactions were brought to a halt over a series of months after the announcement.
The spokesperson for Bitfront was keen to stress that this decision to close had nothing to do with charges of misconduct that had recently been levelled at other crypto exchanges – presumably a reference to the FTX controversy, which Bitfront was eager to distance itself from. Rather, we might just conclude that Bitfront, like LocalBitcoins, was just another victim of the crypto winter.
Protecting Your Crypto Investments
All the recent controversies and closures in the cryptocurrency industry might be enough to have would-be investors second-guessing themselves. It has been a long and “very cold crypto-winter,” as LocalBitcoins said in their statement. But that doesn’t mean these stories should be read as an omen of doom – there’s another way of looking at things we will get to in a moment. But right now, this might be the perfect time to review your set-up and ensure a little extra security for your own investments.
You can do a lot to avoid risk to your crypto investments – either through market collapses, scams, or other unpredictable crypto events – just by ensuring you are always working with the best tools available to you. From crypto wallets to finding the right crypto exchanges to buy and sell on, doing a bit of research now is going to pay off in volumes down the road.
And when it comes to exchanges, it’s always worth listening to what experts say. Recently, many experts have increasingly been recommending platforms like https://immediate-connect.app since they have a reliable array of beginner-friendly trading tools and a popular reputation amongst new and experienced investors alike.
What Comes Next After a Crypto Winter?
While it might be easy to look at the state of cryptocurrencies in 2022 and read a story of doom and gloom, the truth may be a little more nuanced – and there are enough rays of light on the horizon that it might just be time to allow ourselves a little optimism for the year ahead.
Certainly, there were companies and exchanges that didn’t survive the winter, just like the cases of Bitfront and LocalBitcoins detailed above. But some experts are telling us that this is all just part of the natural life cycle of a “boom and bust” industry. In fact, Raoul Ullens – the co-founder of Brussels Blockchain Week – recently suggested that such disruptions served “to skim, to rebalance the sector.” Moreover, he suggested that all those signs that crypto critics had perceived as indications of a crisis could ,in fact, alternatively be read as quite typical and healthy evidence of growth.
The truth is, there is a lot to look forward to in the cryptocurrency industry right now, with numerous new initiatives on the rise that have the potential to inject an adrenaline shot to the markets. Some of the fastest-growing tokens at the minute include a range of recently-launched coins backed by AI technology, and the buzz around these has been palpable – as they see surges, in some cases, of as much as 2,000% in value. The speculative market of cryptocurrencies typically shows close relationships with the news cycle, so any new technology that’s grabbing the headlines is likely to have an imprint in crypto too. And with AI being the subject on everyone’s lips at the moment, it seems likely that these new AI tokens are going to be riding that wave for at least a little while yet.
There have also been an increasing number of cases lately of developing economies adopting Bitcoin as a legal tender – such as we’ve seen in El Salvador or the Central African Republic – and actions such as these have the potential to help anchor the cryptocurrency to real-world growth. In tandem with that, we have seen the rise of numerous new CBDCs, which are digital currencies issued and backed by central banks. The concept behind these Central Bank Digital Currencies is that they might serve a similar purpose as cash, but with all the ease and online compatibility of cryptocurrency – and all the while, being backed by a solid bricks-and-mortar banking institution, thus giving some serious reassurance to would-be investors.
Put simply; there is a lot happening in the cryptocurrency world at present. We are only in February right now, and already this year, we have seen a number of surprising new developments coming out of the crypto space. For every veteran crypto exchange that has closed its doors before the winter came to an end, there is another exciting new crypto project on the horizon. The 30% increase in value that Bitcoin has seen over the past five weeks might be more than just the effect of optimistic investors then… as some crypto enthusiasts have suggested, it could indeed mark the beginning of the end of the crypto winter.
The playing field has been skimmed and rebalanced during the cold winter months – and now it is time to prepare for the arrival of a new spring. As always, it’s hard to predict what the next big thing will be in crypto, but one thing is for sure: this industry is alive and well, and we’re looking forward to seeing what it throws our way in 2023.