It’s funny how back in December we all were so optimistic about what the new year would bring us. Evidently, the new year bought out a lot of doubt and anxiety for some people while some went on a multi-month shopping spree. This New Year Bear market was something that I personally saw coming from the moment I looked at a cryptomarket graph. The graph was nearly straight up for a moment and anybody in the finance world knew that a bubble was formed and it was going to take just one thing (sometimes a couple of things) for that bubble to burst. Although from a technical standpoint the market never did crash – instead it looks as though it had a hard correction. A crash would have been more intense and the line would have fallen more than it did as displayed on the graph below.
Okay, maybe it was a crash but I feel as though a cat bounce right after the down fall wouldn’t have happened so quickly. For Bitcoin to rise to $20,000 in under a year is absurd, but to think that the cryptomarket is cooked is speaking too fast. Markets are to be looked at from an annual standpoint not month-to-month. You may have heard Ripple CEO Brad Garlinghouse say something similar when it came to looking at the digital asset XRP. We are to attempt to gauge the market on an annual basis in order to justify its existence rather than call a 20% decline in price a death warrant for the cryptocurrency market. Remeber Bitcoin itself was selling for a mere $1000 just a year ago and XRP was selling at $.007 around the same time – we are nowhere near the end if gains exceed the 1,000s for some of the big name coins out there. Jumping over to the stock market, your average investor is lucky to make 40% gain on their investment on a annual basis, while some lucky joe was buying XRP at $.007 in January 2017 and selling it for $3.80 in January of 2018.
Will the market go up? Maybe. Will the market go down? Probably not, but that’s not to say we have some work to do with cryptocurrency. We still get scared over the word “regulation” and “banned”. Well gives a damn? It’s apparent that to live in today’s society we definitely need some regulation to keep us in check because let’s face it – do you really want certain people out there running around using crpyto to evade taxes or lying to the public and selling “shitcoins”? No way, but some will say, “you can do all that with paper money and that’s legal everywhere”. Of course, legal money has been established and has been in use for many years. Bitcoin? about 10 years. People and government need to get a better grip of it and throw in a tiny bit of regulation – tiny bit. We don’t need government limiting the full scope of blockchain, but we also don’t need the wrong people to be taking advantage of the newly formed technology. Will bad people still be using crpyto? Of course, but at the same time do you want more shitcoins in the market? No, so that’s why we need some regulation to help alleviate some of these issues that we are facing.
Are whales even a factor anymore in the cryptocurrency world? Apparently so. As stated from the CNBC article linked above, “a trustee of defunct Tokyo bitcoin exchange Mt. Gox sold roughly $400 million worth of the digital currency to pay off creditors, according to documents published last week”. $400 million can move a market for sure, but what’s causing billions to be drained from the market? Market sentiment. People won’t keep money in things that they are not sure about and this is understandable because it happens all the time in the stock market. If the non-farm payroll numbers come out bad or all of the companies earnings are bad then people freak out and leave as soon as they can. When that happens this is where people like Warren Buffett like to shop, but only in companies he’s confident will turn around. The same can be said about crypto, but maybe for a lot less companies. Obviously not all the coins will survive, but the few that will survive will go on strong. It’s unfortunate that a lot of the coins do not serve a real purpose just yet.
My overall sentiment is that the regulation from the government needs to happen. It sucks and I disagree with it too, but things like taxes and fraud is something our loving government can’t possibly let happen without trying to stop it. Give it time, you might not see the days of 1,000% return in a week (you might actually since the market is still volatile), but you will definitely see returns that are justifiable for the work that these companies put in and help create real world application. Like I said in a couple of articles back, real world application is the key to the survival of these companies – no way in hell is a company with no durable competitive advantage going to thrive in a booming economy unless it’s mob owned or something to that nature.