At last, after a week-long correction, the cryptocurrency market surpassed $450 billion in valuation, for the first time since February 4. While the market has been steadily recovering, it still isn’t ready to initiate strong rallies.
On February 10, when the market valuation of all cryptocurrencies in the market combined achieved $458 billion, the price of bitcoin peaked at $9,074 and the price of Ethereum hit $911. However, since then, the market has struggled to maintain momentum, as bitcoin fell by more than $500 to $8,461 and Ethereum fell to $840.
Briefly, earlier today, the price of Ether, the native cryptocurrency of the Ethereum network, fell to $820, to a two-day low. Generally, the price trend of Ether has followed that of bitcoin over the past few weeks. As the price of bitcoin surpassed $9,000, Ether achieved $900 and as the price of bitcoin fell to $8,500, Ether fell to $850.
Overall, the entire market has been following the trend of major cryptocurrencies including bitcoin and Ethereum, mostly because in periods of extreme volatility, cryptocurrencies with large market caps tend to operate as reserve currencies of the market.
In previous corrections, the cryptocurrency market recovered quickly because there was still hope among newcomers and casual investors that the market would rebound in the short-term. This correction has been significantly different to previous corrections. The media has reported more stories about investors losing money than optimistic developments within the cryptocurrency sector.
South Korea in particular, which continued to show optimism throughout 2017, was hit with a bear market in recent weeks due to negative press. This week, another individual committed suicide due to his losses in the cryptocurrency market. The public was shocked to discover that the individual was a well-known senior developer at a high profile IT startup in the country.
Given the negative press towards the cryptocurrency market, despite the enthusiastic approach of regulators as seen in US Securities and Exchange Commission (SEC) and US Commodities and Futures Trading Commision (CFTC) senate hearing, it may require several more weeks for the market to recover and major cryptocurrencies like bitcoin, Ethereum, and Ripple to regain psychological thresholds at $10,000, $1,000, and $1 respectively.
2018 Cryptocurrency Catalysts
Institutional Money Flow
Institutional money is expected to flow into cryptocurrencies once Bitcoin is believed to have bottomed. A ton of capital has already been flowing into the exchange-traded funds business. Investors poured about $240 million into two blockchain-focused ETFs in the 1st week of their launch. In addition to that, the number of new Blockchain technology and cryptocurrency hedge funds could triple in 2018 as Wall St. shows up to the party.
Given how many new crypto-millionaires were minted in 2017, complete newbies and others with little understanding of the technology or investment experience rushed in to capitalize. Many started funds with Bitcoin and other cryptocurrencies at or near all-time highs.
Several Hedge Funds Rushed into the cryptocurrency space in the 2nd half of 2018 bringing the total of crypto Hedge Funds to 150. Because of this frenzy, some seasoned players in the space refrained from jumping in. William Mougayar, general partner at early stage fund Virtual Capital Ventures and author of The Business Blockchain who organized Token Summit, wrote via email, “I don’t want to be in the difficult position of explaining to my limited partners 8-14 months from now why the assets have dropped by 80% within a week.”
Michael Novogratz, the former macro manager who’s turned into one of the biggest champions of bitcoin, shelved plans to start a cryptocurrency hedge fund and predicted that the digital money may extend its plunge to $8,000. Novogratz isn’t giving up on them and said he still believes they’ll be a disruptive force in finance. He had said this month that bitcoin could reach $50,000 by the end of next year — upping his previous estimate of $40,000.
Matt Siebenthal, former macro Advisor and professional trader, is another huge believer in Blockchain Technology and the potential for it to revolutionize industry. Siebenthal shared similar sentiment in December with concern for valuations while many carelessly entered the space. The founder of BlockWealth Capital also postponed plans to launch a crypto hedge fund- citing a possible correction to 7500 or lower before the cryptocurrency market- led by Bitcoin resumes it’s uptrend, anticipating a bull run similar to 2017.
Out of the 40+ Hedge Funds that opened their doors in the 4th quarter of 2017 it will be interesting to see how many of them are still on the chopping block after the 50% correction that we’ve seen to start out 2018.
“Increasing regulatory recognition of cryptocurrency exchanges, the entrance of institutional capital and major technology developments will contribute to the market’s rebound and push cryptocurrency prices to all new highs this year,”
To Glucksmann, there’s no reason not to see bitcoin push to $50,000 by December. The technology he referenced was bitcoin’s much-anticipated Lightning Network (LN), which recently surpassed a major milestone as by reaching 1,000 mainnet payment channels.
Recent Regulatory “Open Mindedness”
CFTC Issues Surprisingly Tolerant Commentary on Cryptocurrency at Senate Hearing
With major banks blocking customers from buying Bitcoin with credit cards and governments cracking down on cryptocurrencies, a Senate hearing on the topic Tuesday was a surprising respite for HODLers (hold on for dear lifers).
The Senate Banking Committee heard testimony from the chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, and the chairman of the Securities and Exchange Commission (SEC), Jay Clayton, on the potential dangers of digital currencies as investments. Their testimony, amid a crackdown on Bitcoin exchanges in China and South Korea, wasn’t as negative as many cyrptocurrency investors had feared.
As a result, Bitcoin prices rose to $7,650 on Tuesday, after dipping below $6,000 just a day earlier.
“We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one,” Giancarlo said.
Ok, that's it, the Chairman of the US Commodity Futures Trading Commission just described "HODL" and how it fascinates him. If that isn't an indicator that crypto is here to stay, then I don't know what is. https://t.co/psFNSGN5Jt
— Giuseppe Stuto (@gstuto) February 6, 2018
Cryptocurrency Backed Instruments (ETF’s) On Major Exchanges
Another possible catalyst for the recovery could be the release of a cryptocurrency backed instrument listed on a major exchange. While both CME and CBOE already launched bitcoin futures, Nasdaq recently revealed it is “continuing to investigate” these products.
As CNBC points out, there is still no bitcoin ETF on the market. An ETF, exchange-traded fund, would allow people to trade bitcoin without having to buy the cryptocurrency. Recently, bitcoin ETF applications were forced to withdraw at the request of the US Securities and Exchange Commission (SEC).
Jamie Burke, CEO at venture capital firm Outlier Ventures, noted that the astounding price rises the cryptocurrency market saw last year could be topped this year. He stated:
“We believe after February the market will likely go on a bull run comparative if not greater than last year potentially reaching the trillion-dollar mark before a proper crypto winter sets in where the market becomes more focused on proper market fundamentals.”
Other Tokens Could See Exponential Price Rises This Year
Although some experts see bitcoin hit $50,000, some believe the cryptocurrency has no fundamental value. Others see potential in cryptocurrencies that can be used to build new blockchain applications, such as NEO and Ethereum.
Mick Sherman, CEO and co-founder of data science company Hercules Tech, said cryptocurrency like IOTA, NEO, and Ethereum are the ones to keep an eye on, as they are creating platforms developers can build on. (Utility tokens)
Market Could Rebound in a Few Weeks
Pantera Capital, the first U.S. Bitcoin investment firm and one of the largest institutional owners of cryptocurrencies. CEO Dan Morehead noted that the cryptocurrency market could begin rallying in a few weeks, as the market has been in correction for over 52 days. Morehead said:
“We’re certainly aware it’s a very speculative market. It’s volatile on the upside. It can be volatile on the downside. And we’re 52 days into this. It seems like another couple of weeks and everything will be normal and [bitcoin] can start growing back up again.”
Morehead emphasized that bitcoin is still underowned by retail traders and the adoption of the asset class by institutional investors in 2018 could allow the market to grow rapidly.
“There’s such an institutional appetite to get exposure to this. It’s a half-a-trillion-dollar asset class that nobody owns. That’s a pretty wild circumstance. And bitcoin is still so underowned by institutional investors that it trades at its own beat,” he said.
Cryptocurrency isn’t going anywhere. We are in the infancy of the greatest technological revolution of our lifetimes. At the Satoshi Roundtable IV, a small gathering of some of the most influential and legendary figures in the crypto space, wraps up there’s one primary reflection I’d like to share with you: nobody who attended this event appeared in the slightest bit panicked about the recent crypto correction… and neither should you.
In other words, these guys have already seen it all. So a 60 percent-plus drop in the market is just another battle scar amongst many. This isn’t for the faint of heart, and investing into cryptocurrency may not be the best vehicle if you’re on the conservative side. But for those who can stomach the risk.. it is our opinion and that of experts in the field… Over the next 5 years several more fortunes will be amassed.
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