A primary factor in the crypto pullback that most people haven’t recognized is this: Most exchanges are growing far too fast.
So many people are entering the market that many exchanges have had to shut down new user registrations. Most others can’t keep up with customer support.
Bittrex, Bitfinex, CEX. IO and Binance (four of the largest crypto exchanges in the world) have been forced to deny new customer accounts due to explosive growth.
Binance, for example, added 240,000 new accounts in a single hour on January 10. It has since stopped accepting new accounts and only recently began allowing a small number of new users per day.
Coinbase, the largest U.S.-based exchange, continues to experience major growing pains. Its customer support is flooded, and it can’t verify new accounts fast enough.
Exchanges simply can’t keep up with the massive influx of new crypto investors.
Naturally, this has put a damper on markets. When the flow of new buyers is bottlenecked by exchange capacity, it’s of course going to cause a temporary pullback in prices.
Behind the scenes, however, crypto exchanges are furiously upgrading their systems and hiring to meet demand. Due to security requirements and the fact that exchanges are now required to verify all customers, this takes time.
The point is that exponential user growth is a great problem to have. Exchanges are working diligently to accommodate new users, and probably soon, most of them will reopen new account registrations and clear their customer service backlogs.
When this happens, it would not be unlikely to see a sharp rebound in crypto markets. And then we can begin the next leg up. If we get more clarity on government regulation, even better. There’s also the X-factor of institutional buyers, who will start moving into the crypto market in the next few months.
It seems like the end of the world for crypto, but it’s not. We are still at the very beginning.