Is the “crypto winter” here to stay? – Cryptocurrency News
January 17, 2019 4:26 pm
The cryptocurrency complex had a horrendous run in 2018, with most major coins collapsing following their meteoric rise in the prior year, as the “euphoria” faded and in the midst of greater regulatory scrutiny. Alas, considering that several key issues remain unresolved – ranging from security and regulation concerns to illiquidity – it’s difficult to envision any major reversal in the fortunes of digital coins in the foreseeable future.
To say that the cryptocurrency market performed dreadfully in 2018 would be an understatement. Between fading interest from retail investors and institutional players remaining sidelined amid a lack of adequate regulatory standards, most digital coins saw their prices plummet through the course of the year, with the world’s largest cryptocurrency – Bitcoin – losing roughly 72% of its value. Measuring it from its all-time highs reached in late 2017, Bitcoin is now down more than 81%.
Does 2019 promise to be different? Even though there are some encouraging headlines out there, they fall short of suggesting a paradigm shift for the crypto universe. For instance, the Nasdaq – the world’s second-largest stock exchange – is planning to follow in the CBOE’s footsteps and launch Bitcoin futures of its own. Separately, reports suggest the US Securities and Exchange Commission (SEC) could soon approve an ETF tracking Bitcoin, despite having rejected several applications lately citing investor protection concerns. More encouragingly, top US university endowment funds – including Harvard, Yale, and Stanford – invested small amounts in digital coins last year, which presumably is a sign that other big players like pension funds may follow suit.
Yet, for institutional players to really start adding cryptos to their portfolios – and hence for prices to materially rebound – several long-standing issues have to be resolved. First and foremost is security. Hardly a month passes without headlines that a major crypto wallet or exchange have been hacked, often without insurance. On the bright side, organizations like Fidelity Investments – which manages roughly 7 trillion dollars in assets globally – have taken steps towards resolving this, taking custody and storing digital coins for their customers.
Still, a plethora of other problems linger. Some cryptocurrencies are still subject to price manipulation as some so-called “whale” investors hold such a high concentration of those coins that they can unilaterally influence prices. Then, there’s the extreme price volatility, which is often a function of low liquidity in the crypto space. Ironically, this would be resolved by itself if bigger players simply entered the market (the paradox is they may not do so until it’s resolved).
Last but not least, is regulation – or rather, the lack thereof. While many have suggested increasing regulation has been among the chief reasons behind the recent price slump, the crypto market could actually gain overall from establishing clear-cut rules and investor protection. To wit, yes rising regulatory hurdles have likely hurt crypto prices, but for good reasons, as scammers and illegitimate behavior are slowly being flushed out. Once proper safeguards are in place, that could help legitimize the sector, consequently inviting in participants that would have otherwise stayed out.
Until these issues are ironed out, one has difficulty envisioning a major and sustained reversal for crypto assets. An approval of a Bitcoin-linked ETF for example could help prices rebound, particularly since it may come as a surprise, but it’s questionable whether even that would be significant enough to lay the foundations for a prolonged and healthy rally.
Focusing on the shorter-term, technical indicators and breaks can likely provide a strong basis for where the directional bias lies in crypto. Bitcoin prices specifically have been obeying technical breaks quite well – for instance collapsing after a triangle was broken to the downside, as was the case with the break below $6,000.
For now, Bitcoin prices seem to have settled in a range between $3,100 and $4,250, with a break on either side needed to determine the immediate-term direction. A break below $3,100 for example could signal that the broader downtrend is back in force, and open the way for a test of the $1,830 zone, defined by the July 2017 lows. On the flipside, a decisive move above $4,250 may see scope for a test of the November 15 lows, at $5,150.
The cryptocurrency complex had a horrendous run in 2018, with most major coins collapsing following their meteoric rise in the prior year, as the “euphoria” faded and in the midst of greater regulatory scrutiny. Alas, considering that several key issues remain unresolved – ranging from security and regulation concerns to illiquidity – it’s difficult to envision any major reversal in the fortunes of digital coins in the foreseeable future.
To say that the cryptocurrency market performed dreadfully in 2018 would be an understatement. Between fading interest from retail investors and institutional players remaining sidelined amid a lack of adequate regulatory standards, most digital coins saw their prices plummet through the course of the year, with the world’s largest cryptocurrency – Bitcoin – losing roughly 72% of its value. Measuring it from its all-time highs reached in late 2017, Bitcoin is now down more than 81%.
Does 2019 promise to be different? Even though there are some encouraging headlines out there, they fall short of suggesting a paradigm shift for the crypto universe. For instance, the Nasdaq – the world’s second-largest stock exchange – is planning to follow in the CBOE’s footsteps and launch Bitcoin futures of its own. Separately, reports suggest the US Securities and Exchange Commission (SEC) could soon approve an ETF tracking Bitcoin, despite having rejected several applications lately citing investor protection concerns. More encouragingly, top US university endowment funds – including Harvard, Yale, and Stanford – invested small amounts in digital coins last year, which presumably is a sign that other big players like pension funds may follow suit.
Yet, for institutional players to really start adding cryptos to their portfolios – and hence for prices to materially rebound – several long-standing issues have to be resolved. First and foremost is security. Hardly a month passes without headlines that a major crypto wallet or exchange have been hacked, often without insurance. On the bright side, organizations like Fidelity Investments – which manages roughly 7 trillion dollars in assets globally – have taken steps towards resolving this, taking custody and storing digital coins for their customers.
Still, a plethora of other problems linger. Some cryptocurrencies are still subject to price manipulation as some so-called “whale” investors hold such a high concentration of those coins that they can unilaterally influence prices. Then, there’s the extreme price volatility, which is often a function of low liquidity in the crypto space. Ironically, this would be resolved by itself if bigger players simply entered the market (the paradox is they may not do so until it’s resolved).
Last but not least, is regulation – or rather, the lack thereof. While many have suggested increasing regulation has been among the chief reasons behind the recent price slump, the crypto market could actually gain overall from establishing clear-cut rules and investor protection. To wit, yes rising regulatory hurdles have likely hurt crypto prices, but for good reasons, as scammers and illegitimate behavior are slowly being flushed out. Once proper safeguards are in place, that could help legitimize the sector, consequently inviting in participants that would have otherwise stayed out.
Until these issues are ironed out, one has difficulty envisioning a major and sustained reversal for crypto assets. An approval of a Bitcoin-linked ETF for example could help prices rebound, particularly since it may come as a surprise, but it’s questionable whether even that would be significant enough to lay the foundations for a prolonged and healthy rally.
Focusing on the shorter-term, technical indicators and breaks can likely provide a strong basis for where the directional bias lies in crypto. Bitcoin prices specifically have been obeying technical breaks quite well – for instance collapsing after a triangle was broken to the downside, as was the case with the break below $6,000.
For now, Bitcoin prices seem to have settled in a range between $3,100 and $4,250, with a break on either side needed to determine the immediate-term direction. A break below $3,100 for example could signal that the broader downtrend is back in force, and open the way for a test of the $1,830 zone, defined by the July 2017 lows. On the flipside, a decisive move above $4,250 may see scope for a test of the November 15 lows, at $5,150.
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