Crypto Landscape Outlook – Dark Clouds Loom Overhead but a Silver Lining Lies on the Horizon
Anyone who invests in, uses, or follows cryptocurrencies has no doubt noticed (and likely felt) the recent downturn that has essentially seen the entire market take a nosedive while gutting the major players.
Fall 2018 saw BTC tumble to and then more-or-less stabilize between $6000 and $7000 USD, followed by another big drop towards the end of November, resulting in prices below $4000 – a level not seen since September 2017. ETH also hit lows wiping out growth all the way back to May of 2017.
Understandably, these “crashes” caused a lot of panic in a lot of people – which can be a knock to prices in and of itself – but as always there are clear drivers behind this downward movement, and a little analysis can go along way to easing the pain inflicted by red arrows.
Bad News Bears
It isn’t a surprise to anyone that crypto prices are highly volatile, and negative news can have significant short-term effects. Unfortunately, there’s been a lot of that lately. For one, there have been some high-profile regulatory issues. On November 16th, the SEC nailed two companies running ICOs – Airfox and Paragon Coin – for selling unlicensed securities . That led to a drove of speculation that a huge enforcement wave might be on the way, leading to selloffs.
Another high-profile SNAFU was the emergence of the Hash Wars. On November 15th, a hard fork split Bitcoin Cash (BCH) – the fourth largest crypto network in the world – into two competing chains. That launched a war between the two new networks – BCHABC and BCHSV – to see who would emerge as the top player. BCHABC – the renamed original – won the war, but the turmoil saw a huge drop from where BCH had sat before the split.
Between the new regulatory pressures, the Hash Wars, and a spate of older bad news like reports of BTC price manipulation by Tether, it’s no surprise prices have dropped off significantly. And in fact, it was no surprise to many major players in the crypto community, who fully expected a significant correction from the enormous heights that the market had peaked at in January.
Hope on the Horizon
The good news is that as painful as the correction has been, there is every reason to think that the overall outlook remains bright in both the near and long-term. So much so in fact that many of the top analysts, like Fundstrat’s Tom Lee, are actually sticking by their year-end price predictions. Those predictions (in Lee’s case, $15,000 BTC by year’s end) aren’t likely to come true anymore under current conditions, but they’re a testament to how high confidence still is despite the recent setbacks.
For one thing, the hard fork that caused the Hash Wars was scheduled. We knew it was coming. While some of the drama surrounding it that helped gut prices was unforeseen, the actual fork was not a surprise. The war has ended, a winner has emerged, and now healing can begin as it always does. As with the original BTC/BCH split and the ETH/ETC split, things will normalize in time.
On the regulatory side, while SEC crackdowns might seem bad for the market, and do hurt prices in the short-term, in the long-run regulatory scrutiny is likely to be a boon for all legitimate cryptocurrencies, both new and old. As new offerings face greater scrutiny, the scams and junk-coins will be driven out, greatly increasing confidence in the networks that are actually playing by the rules and doing things right. That should help drive prices way up.
Finally, overall adoption and institutional investment are set to explode, and both are going to have an enormous impact on turning the crypto-ship around. While all Bitcoin ETF applications to date have been rejected, SEC Commissioner Hester Peirce recently came out and outright said that a Bitcoin ETF is “definitely possible” and not off the table by any means. An ETF approval would have an explosive impact on overall prices.
Consumer adoption is also set to take off, with promising projects like Bakkt and Terra looking to make widescale adoption easier than ever for both brick and mortar and ecommerce applications. Anything that gets more people involved with cryptocurrencies can only be a good thing for the market in the long-term.
It’s clear that as painful as the current market conditions have been for many (especially those that bought in at the top), those looking towards the long-term horizon still see an enormous amount of promise ahead. Cryptocurrencies are volatile, and speculation is a wild rollercoaster ride, but those who are in it for the long run, and who truly believe in the technology and the potential applications, have a lot to look forward to.
And remember, when all else fails, just zoom out!