On September 12th 2017, Charlie Lee – the person behind Litecoin – tweeted the following message:
“Looks like this time China finally banned Bitcoin exchanges. (Anonymous source I trust fully). There’s only one response: JUST HODL “
HODL stands for both “hold on for dear life” and a misspelled “hold” originating in this forum post. It’s used in cryptocurrency circles to signify keeping your cryptocurrency and not selling despite market fluctuations.
A few moments later, the entire cryptocurrency market crashed by 10% in 20 minutes. One hour later, 5% has been recovered. Charlie has been accused of FUD, deleted the original tweet, and went off of Twitter for a while to calm down after being barraged by accusations.
As innocent and silly as it all may seem, a tweet capable of obliterating 10% of an entire market is objectively a very dangerous thing. This is precisely why cryptocurrencies must become mainstream and spread into the hands of the ordinary people. Just like we said in the post about Bitcoin being unstoppable, only once cryptocurrencies are irreplaceable will they have become unstoppable. Crashes like these are possible simply because Bitcoin is still too small and insignificant in the global context.
Like we mentioned in the Bitcoin being a bubble post, these scares are good for the long term progress of the currency – not just because they scare dumb money away and prevent long term losses by innocent people, but also because the regulation the type of which caused this stir is direly needed in China.
As one Redditor puts it, China is suffering from massive whale (people who have a lot of cryptocurrency) manipulation via fake news, exchanges have no official accounts or audits so all fiat payments of citizens end up directly in the pockets of the site owners, with mere numbers simulating cryptocurrency ownership remaining on screen, exchanges change their fees at will, they add or remove trading pairs as they see fit to manipulate the market or stop withdrawals, etc.
The regulations that are now at China’s doorstep (we should point out once again that it’s regulations, not bans that are incoming) are a way forward into a more controlled but stable cryptocurrency market. As dumb as it was of Charlie Lee to spread FUD this way, he got one thing right: just HODL. All crises have their end, and cryptocurrency will emerge from this one stronger than ever.