Italian Politics and Recent Hacking Result in Crypto Discounts

Italian Politics and Recent Hacking Result in Crypto Discounts

Cryptocurrency prices dropped suddenly and then stabilized this week as investors continued to come to terms with recent hacks and potential eurozone instability.

As I mentioned last week, cryptocurrencies have been selling off following recent news of a hack of a small cryptocurrency known as verge (XVG). The hack has led some investors to incorrectly assume that bitcoin and ethereum are vulnerable, and panic as a result.

Then, this week, news of a potential political crisis arose in Italy. Fears emerged that a newly formed right-wing coalition could attempt to force an election to leave the eurozone.

Cryptocurrency markets briefly dropped following the news, but they have since rebounded, as a compromise between the major political parties has made new elections unlikely.

At their lowest points, bitcoin and ethereum bottomed at the $7,100 and $520 marks, respectively.

However, the cryptocurrency sell-off in the aftermath of these two events is unjustified.

For one thing, cryptocurrencies offer an alternative to traditional fiat currencies (such as the euro). For example, the price of bitcoin spiked in July 2013 when the government of Cyprus taxed some bank deposits by more than 40% to bail out the country’s banking industry.

Additionally, hacks of smaller (scam) currencies have absolutely no bearing on legitimate projects like bitcoin and ethereum.

And while markets have been focused on the potential bad news, promising new developments may be around the corner.

Earlier this week, Chinese President Xi Jinping praised blockchain during a speech at the Academy of Sciences, fueling speculation that the country might be readying for new pro-blockchain regulation.

Separately, South Korea's National Assembly has proposed new legislation to lift the country’s ban on initial coin offerings.

Considering all these factors, I believe cryptocurrencies are currently trading at a discount to their long-term potential.

Takeaway: Cryptocurrency markets fell sharply earlier in the week, as investors remained apprehensive about hacking risks and political instability in the eurozone.

But promising crypto developments in China and South Korea may be around the corner — though they have not yet strongly impacted the markets.

Given our long-term outlook on the potential of cryptocurrency, I believe cryptocurrencies are currently trading at a discount.

I continue to remain bullish on both ethereum and bitcoin.