Economic Daily: Hype on virtual currency will eventually come to naught

"The currency circle has collapsed" is on the hot search again. Recently, the virtual currency market has encountered a "big ransack". First of all, the LUNA coin, known as the "Moutai in the currency circle", plummeted by more than 99%. Since May 11, it has fallen from above $30 to around $0.0003 on the evening of May 14, almost to zero. Virtual currencies such as Bitcoin and Ethereum also plummeted one after another. On May 12, Bitcoin fell from around US$32,000 to below US$27,000.

The virtual currency, which has always been touted as "digital gold" and "safe haven asset" by people in the currency circle, has once again proved its high risk and "big bubble" with practical actions. The plunge was largely related to the Fed's rate hikes. The price of virtual currency is easily affected by liquidity. In a market environment with loose liquidity, speculation prevails, driving up the value of the currency. Once the market environment changes, the market tends to take a sharp turn for the worse. Since the beginning of this year, the Federal Reserve has launched an interest rate hike cycle, and global liquidity has tightened. Especially in early May, the Federal Reserve raised interest rates by 50 basis points at one time, which has a negative impact on funds and market sentiment, and virtual currencies bear the brunt.

Skyrocketing and plummeting is the consistent performance of virtual currency. Virtual currency has no real value support, and its price is extremely easy to be manipulated. Changes in regulatory direction, trading by several investment giants, etc. can lead to violent fluctuations in currency value, triggering a large number of sell-offs.

With the efforts of my country's regulatory authorities to build a firewall, it has effectively blocked the transmission of virtual currency risks in the country. Since last year, the central bank and other departments have issued a series of measures to prohibit financial institutions from carrying out and participating in virtual currency-related businesses, clean up and ban domestic virtual currency trading platforms, and increase efforts to check and rectify "mining" to extinguish the "false fire" of virtual currency speculation in an all-round way ", put a "protective lock" on investors' wallets. The tragic "bloodbath" of virtual currency this time proves once again that the actions of my country's regulatory authorities are decisive, powerful and timely.

It should be emphasized that in our country, virtual currency transactions are not protected by law. In September last year, the 10 departments issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Hype", clarifying that any legal person, unincorporated organization or natural person who invests in virtual currency and related derivatives violates public order and good customs, and the relevant civil legal acts are invalid. The losses caused by this shall be borne by themselves; those suspected of disrupting financial order and endangering financial security shall be investigated and dealt with by relevant departments according to law. This means that investors who "enter the circle" hastily, not to mention self-inflicted losses, are likely to touch the red line of the law.

For an investment target, if there is speculation and hype in the air, and there is no actual wide application scenario, there will be no development prospects. At present, the plunge is still going on, and no one knows when this "runaway roller coaster" will reach the end. Investors should remain rational, promptly extinguish the greed for bottom-hunting and getting rich overnight, and stay away from related trading hype activities, otherwise it is very likely that "coins will lose money".