19 April 2021 Monday
Experts comment on cryptocurrency decision of CB: Not arbitrary but a protective precaution
Evaluating the decision taken by the Central Bank (CB) to ban cryptocurrencies as a means of payment, Finance Specialist Dr. Hakan Yıldırım says, “The decision taken is not arbitrary, it is a protective measure for the welfare of the society. "It is important to protect the society with various measures and sanctions and to awaken it from the dream of getting rich easily."
The Central Bank has issued a regulation that prevents the use of crypto assets in payments. Accordingly, crypto assets cannot be used directly or indirectly in payments, and services for the direct or indirect use of these assets in payments will not be provided.
Finance Specialist from Istanbul Gelişim University, Lecturer Hakan Yıldırım indicated that the price bubbles formed in the market could cause economic problems and said, “We should first undertstand what this price buble is. Well, the price bubble can be defined as the pricing of an asset between real and virtual value in favor of virtual value. However, it is necessary to look at how this occurred rather than its definition. Even if these price bubbles occur for one reason or another, people are fed by the dream of getting rich the easy way."
"SOME INVESTORS MAY GIVE UP PURCHASING"
Stating that the bubbles of asset prices in the market move in four stages, Yıldırım said, “The first of this stage is confidentiality. Confidentiality can be expressed as a region or process where prices are low and can be expressed as an initial price. In this process, investors who can be described as smart ones start to buy assets and asset prices gradually enter into an upward pricing behavior. The second stage is the awareness process. In this process, institutional investors now appear on the scene and prices continue to rise in this region and experience a sudden but not sharp decline after a certain point. The main reason for this is that the first sales occur. This point is called the bear trap and some investors stop buying even if they don't panic too much. In the last phase of this process, prices rise with the attention of the media and the news."
“THEY BELIEVE THE PRICES WILL CONTINUOUSLY RISE”
Stating that every segment of the society want to make investments and earn money easily in the third process, Yıldırım continued his words, “With great enthusiasm, they start to believe that the prices will increase continuously. Now they tend to sell almost all of their assets to the investment instrument or to buy the asset in which they show great interest. Prices go into an extreme increase behavior in this process. In this process, the price of the asset hits the highest point, and this peak becomes the first and last peak. Now the price bubble has inflated so much that nobody believes that this bubble will collapse. Of course, in this process, some smart investors or financially literate investors gradually start selling to attract their profits. Other part of the investors, on the other hand, do not take this pressure of slowly dropping price into consideration. In other words, at this point, the belief that prices will always increase becomes more dominant and this process represents the fourth phase, the extinction process.”
“PRICES CAN’T BE RECURED”
Indicating that prices fell due to short and small movements during the extinction process and investors start to deny this “price fell”, Yıldırım said, “This denial is due to the behavior of investors who believe that the asset will return to previous levels. Therefore, there will not be a total panic atmosphere against the falling prices, and it causes the continuation of purchases with the aim of making a profit even if the profit will not be huge. However, even though the low buying pressures in terms of quantity cause the prices to enter a small correction period, a falling price behavior is inevitable again. In this way, panic is inevitable and some investors start to sell, and as a result of the selling pressure, there is a dramatic decrease and prices become no longer recovering. In this way, investors who buy while the price is at a high level will make great losses.”
“IT IS A DREAM OF MAKING MONEY FOR OLD ROPE”
Emphasizing that the decision taken is not arbitrary, Yıldırım said, “It is a protective measure for the welfare of the society. The important thing is to protect the society with various precautions and sanctions and to awaken it from the false dream of getting rich easily. In addition to restricting the crypto asset in payments, it is also essential to strictly supervise investment activities. The fact that some institutions allow investors to buy and sell cryptocurrencies with 1:10 leverage causes investors to take more risks against highly volatile cryptocurrencies. In other words, not only the risk but also the possible damage increases 10 times more. In short, it seems like it is a condition that some regulations should be introduced, as both trading within a leveraged system and trading without leverage involve significant risks for investors."
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