Last week our theme was “Governments Love Blockchain“
Our theme for this week is “Bitcoin Whales, Bulls & Bears Heading to zero? Or heading to $1 million? Your call“
Over the last year, we have seen all kinds of predictions regarding Bitcoin and its future. Some claim that its doomed, heading to zero, while others believe that it will eventually reach breakaway speed and jump out of the stratosphere.
To the inexperienced users who’ve heard of Bitcoin, but don’t really know about it, price drops over the last year are only an indication of Bitcoin’s failure. However, for those that have been in the market for a while, they are aware that Bitcoin has had its fair share of bear markets in the past and has come back stronger.
Cryptocurrencies have followed an interesting path, since their boom in late 2017. There has been growth, regulation, and changing sentiment.
Despite the dropping prices, the crypto user base has been growing. According to a report by the Cambridge Center for Alternative Finance, crypto users doubled in 2018 rising from 85 million in 2017 to more than 139 million in the first three quarters of 2018.
Governments are developing regulatory frameworks to foster cryptocurrency innovation, and large financial institutions are getting involved.
In July 2018, Malta became the first country in the world to establish a clear regulatory framework for cryptocurrencies and ICOs. Japan again has been ahead of the curve, by officially allowing the crypto industry to self regulate. It has turned over this responsibility to the Virtual Currency Exchange Association (JVCEA), rather than authorizing traditional financial regulators, to oversee crypto exchanges.
Despite attempts at regulation, it still remains a challenge. The U.S. approach to regulating the crypto industry has been to work within its current laws, rather than introduce new ones. Other countries like Russia and India are preparing specific legislation for cryptocurrencies. We can expect governments to focus on taxation and regulation for ICOs/tokens offered to the public, as the top nations agreed in the last G20 Summit.
The crypto market tends to be very emotional and volatile. People tend to get greedy, when the market rises, developing FOMO or become erratic, selling their coins when they see red numbers. The Crypto Fear & Greed Index, shows us how people’s emotions and sentiments change over time.
When it comes to ICOs last year, we saw even more growth, significantly higher than 2017. In 2018, ICOs raised $21 billion in capital , 3.5 times more than 2017.
Yet, investors no longer needed to buy BTC or ETH to buy the tokens of blockchain projects. 2018, was the age of private sales. With private sales, investors can purchase tokens directly, using US dollars or other fiat currencies. The 2017 bull run, in many wats was driven by investors buying ICO tokens with BTC and ETH.
On the tech side, despite the bearish market trends, Lightning Network has been making significant strides. We’ve seen a sudden influx of nodes on LN, growing by 300%. Data analyzed by 1ML.com showed that its 11,000 nodes surpassed $2 million and 574 BTC. LN can potentially, push the Bitcoin to a larger audience, which may include large centralized banks. Once Bitcoin gets past the scalability issue, its adaptation in the main financial ecosystem will boom to new heights.
One of the most anticipated developments coming soon to the crypto industry is the launch of Bakkt. Intercontinental Exchange, the operator of the New York Stock Exchange is planning to launch Bakkt, a federally regulated market which will seamlessly and safely enable institutions and consumers to buy, store and sell crypto assets.
It remains to be seen if we will see a significant increase in value, if prices remain around these levels or drop even more. As Bitcoin, cryptocurrency and blockchain adoption continues to grow, it simply becomes harder for them to disappear in thin air or for prices to go to zero. The fact is that cryptocurrencies aren’t going away and will remain an important element of the landscape in the future. Peer-to-peer, decentralized cryptocurrencies hold tremendous potential. The crypto market and blockchain technology are still in their infancy and more innovations are yet to come.
The crash we saw in 2018, is by no means an indication of long term value. At this point, the market will continue to be affected by speculation. Even small developments by governments and regulators will likely affect prices. Also, a big numbers of Bitcoins have been moved by whales out of cold storage. On any given day, this could mean market changes, larger than 10%, in either direction,.
It’s difficult to put a finger on price, but I believe that prices will rise over time and Bitcoin will regain its footing. As institutional investors join the market, they will jumpstart the next bull run. Whether it happens through direct investment or because of new developments like Bakkt or Bitcoin ETFs, one thing is for sure, its coming.
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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.