By Gabriel Ojimadu, Alpari
The cryptocurrency market was graced this week with a bit of good news – bitcoin has grown by 18% in the last two days, to 7,450 USD. Trading volumes have increased and the presence of large buyers on the market is also evident, despite the lack of any significant news on bitcoin recently. It is entirely possible that interest in bitcoin has resurfaced following a decline in the first half of 2018. The first six months of the year saw bitcoin fall 63%, to 6,350 USD. And despite attempts to rebound upwards in February and the end of April, they failed to lead to a reversal of the trend. It looks like we will have to wait and see what will happen this time.
In the first half of the year, the only cryptocurrency making gains was EOS, which at the end of April hit a fresh all-time high and broke into the top 5 cryptocurrencies. EOS – a cryptocurrency based on Etherium, made its debut in May 2017. The reason behind the growth was the expectation that it would be launching its own platform. However, following a system malfunction, trading activity saw a dip. Moreover, most of the other cryptocurrencies, as well as bitcoin, have fallen by 40-60% since the beginning of the year.
In addition to the price, the trade volume and volatility (exchange rate fluctuation) of cryptocurrencies fell by 1.5 times as compared with last year. In the first half of the year, cryptocurrencies were not in demand as an investment tool. This is understandable, as it has not made a new high in six months. A significant proportion of those who bought bitcoin at the end of 2017, hoping for growth, grew disappointed and cut their losses. The number of short positions on bitcoin also increased. On the one hand, investors’ faith in bitcoin is undermined by tightened regulations (Japan and South Korea are cracking down in this regard), and on the other, hackers infiltrating Coinrail and Bithumb. This is yet another instance highlighting the lack of sufficient cybersecurity on electronic platforms. It is telling that the number of searches with the tags “buy bitcoin,” “ICO,” and “mining,” as well as the number of references to bitcoin on social networking sites, have noticeably decreased. It is worth mentioning that Facebook, Twitter, and Google have all refused to advertise cryptocurrency investments.
There have been quite a few ups and downs throughout the history of bitcoin. We all remember very well the cryptocurrency’s take-off last year, and even before that there was a stir in 2013, followed by four years of calm. For those who bought bitcoin in the first half of 2017, investing in cryptocurrencies remains profitable. A significant share of these investors continue to believe in the prospects of bitcoin and expect it to reach 20,000 USD.
We believe that in the second half of the year the launch of new ETFs for bitcoin may revive interest in the cryptocurrency, which will lead to the inflow of large investors to the market. If this does not happen, then cryptocurrency fever will continue to fall by the wayside. If in 2017 one couldn’t go far without hearing something about the crypto market, now significant events are being covered noticeably less, and the excitement around cryptocurrencies and ICOs has worn off. However, this does not in the least cancel out the pros of bitcoin – anonymity and decentralisation. These properties are guaranteed to be in demand in the financial world, especially given the escalation of trade wars recently. The development of blockchain technology will continue, and I foresee altcoins as a future means of payment.
Another historical parallel is the dot-com bubble in the US in the early 2000s, which ended with many IT companies tanking on the market. However, this did not stop Amazon, Google, Facebook, and eBay from becoming worldwide corporate heavyweights. We believe that sooner or later, interest and investment in bitcoin and its crypto peers will reemerge. However, it is difficult to predict when exactly that moment will come. Perhaps next year, perhaps in five years. We will just have to wait and see.