Cryptocurrency will cause a meltdown as big as 2008 

Cryptocurrency will cause a meltdown as big as 2008 

 Sir Jon Cunliffe, the deputy governor for financial stability, believes that the cryptocurrency market can lead to a financial crisis at the same scale as the 2008 great Recession. 

 The government and the authorities need to be highly involved in the financial systems that grow remarkably fast. Especially if they are growing in a largely unregulated environment, such as the cryptocurrency market. That is because financial stability will be more and more at risk if the crypto market keeps growing at such a rapid pace. This is while the scale of the risk beard can be easily adjusted. Regulators need to take action. 

Bitcoin has experienced sharp increases and decreases on many occasions. In some cases, it has fallen up to 10% in a single day. Based on its history, Bitcoin is not considered a stable asset. It will always carry a high level of risk. This instability can harm both the market and the investors. That is why many wonders that what would be the result of such an unregulated high-speed growing market? 

Should cryptocurrency be banned?

   Cunliffe further explains that he disagrees with the government overreacting and preventing new approaches from prevailing simply because they’re different. Crypto technology can also offer radical improvements. However, it is important to keep in mind that these large-scale activities are happening in an unregulated space and that carries risk.

   Andrew Bailey, Bank of England Governor, is expressing his concern about the crypto market in May. According to him, soon the cryptocurrency investors will lose all their assets. He believed this loss because these currencies have no intrinsic value. Many other financial authorities have also expressed their concerns about the risky nature of cryptocurrencies. 

 The rapidly growing market of cryptocurrencies and the market of the subprime mortgage have many factors in common. It was the knock-on effects in 2008 that ultimately led to an international financial crisis. The crypto market also has the same pattern. Even though these two markets have a lot of factors in common, the authorities still hold the power to manage the risk of this market. It can be done by introducing major corrections and preventing a repeated economic meltdown. One of the corrections suggested is to regulate the risk factor in the digital currency market, such as the traditional finance market. 

   Even though many regulators around the world have started to take action toward regulating the cryptocurrency market and are establishing a public policy framework that would take the exponential growth of cryptocurrencies under control, we need to keep in mind that at this point, such actions must be pursued as matter of urgency.