Will crypto make comeback in 2019 and does it really need to? The industry needs time that only a dull market can provide by Dimitar Bogdanov Thursday, 17 Jan 2019, 14:59 GMT
Following a turbulent year for the cryptocurrency market, the question on everybody’s lips is “Will 2019 be the year of the comeback?”. And while January has so far shown us that prices do not go magically up just because we’ve advanced to a new calendar year, the notion that digital currencies would eventually turn their fortunes around is not inconceivable. After all, Bitcoin, the original cryptocurrency, is currently in one of its worst bear markets ever, so how worse could it realistically get?
So it is relatively safe to assume that this bear cycle will end sooner or later, but will this happen in 2019? I think that such expectations are not unreasonable and that this year will provide plenty of potential catalysts for a new bull run. While many big players in the financial world are still hesitant, or openly critical of crypto, projects such as the upcoming Bakkt Bitcoin futures market, which is backed by Intercontinental Exchange, and Fidelity Investments’ efforts to build institutional-grade products for crypto investors indicate that big institutional investment will be coming to the digital currency space. Meanwhile, cryptocurrency exchanges such as Coinbase and Binance are continuing their transformation from online marketplaces for crypto into drivers of technology innovation in the industry.
While the potential for a 2019 comeback is there, I believe that there is a more important question: Is a comeback in terms of price what the industry needs right now? Is it really that grim?
When we talk about the ongoing crypto slump, we usually refer to how terrible last year was for crypto markets, compared to 2017. More specifically, we refer to the sharp decline in the Bitcoin price from its December 17, 2017, high of $20,089.00* (many major digital currencies, including Ethereum and Ripple actually hit their all-time highs in early 2018).
Almost a year later, on December 15, the Bitcoin price set its 2018 low at $3,191.30, which meant that the No.1 crypto coin had lost 84.1% of its value over the span on just under 12 months. This was on par with Bitcoin’s two-year bear market that followed the infamous hack and subsequent closure of Japanese crypto exchange Mt. Gox, and second only to the 2011 Bitcoin slump, when the coin’s price tumbled more than 92% in just five months. Looking at the market from that perspective, the situation seems pretty grim.
But what if we look at 2017 as a whole? Bitcoin opened that year at $963.
66, which, considering the current price levels, means that BTC has nearly quadrupled its value over the past two years. Granted, this is a very skewed way of looking at the market, as it doesn’t reflect the fact that didn’t really hit its stride until the second half of the year. But if we looked H2, 2017, we’ll see that prior to the one-month period from mid-November to mid-December, Bitcoin had peaked at around $7,700. It then took less than a month for BTC to double that figure during the late 2017 crypto craze.
All this doesn’t mean that 2017 wasn’t a great year for crypto, or that 2018 was any less bad. The point I’m trying to make is that Bitcoin’s late 2017 rally and its continuation in the form of the early 2018 altcoin bull run were anomalies that served no other purpose but to overhype the market, embolden bad actors looking to profit on the latest fad and strengthen the case for the naysayers perpetuating the notion that the crypto market was a bubble. The inevitable pull-back was severe, but, in hindsight, it might have been a blessing in disguise for the broader cryptocurrency sector. $6,000
2018 was in many ways a sobering year for the industry, but it was not all bad in cryptoland.
Yes, the sector was bombarded with news of exchange hacks, regulatory crackdowns, troubled projects and illicit activities, but some positive trends also emerged last year. Perhaps most encouraging was the fact that for most of the year, Bitcoin was able to fend off attacks on the key $6,000 resistance level, even in the face of significant pressure. The defence finally broken on November 14, ahead of the highly contentious Bitcoin Cash hard fork, which led to the split of that cryptocurrency.
The significance of the $6,000 mark has been highlighted on a number of occasions by Fundstrat Global Advisors’ Tom Lee, who estimates that the break-even cost for mining Bitcoin is around that level. The growing amount of news about big miners struggling in recent weeks seems to support that estimate. There is an argument to be made that big miners shutting down could be beneficial for the industry, as it could lead to more decentralised networks.
However, whether small miners could thrive in such an environment is highly debatable. A wake-up call
2018 provided a much-needed wake-up call for the crypto sector, showing that the industry still needs to go a long way to come out of its infancy. But it also provided an opportunity to do so, by taking away the spotlight from market prices.
“I think that with the price currently depressed, its actually good time for people to… get stuff done, and that’s what I’ve seen in the past few bear markets,” Litecoin’s creator Charlie Lee said in an interview with CNBC last August.
It seems that companies are indeed looking to make use of that time.
Last month, a new study by LinkedIn, the professional social network, showed that the role of blockchain developer had been the fastest growing emerging job in the US in 2018.
The study found that the role had seen an increase of 33 times over the most recent 12-month period and is in particularly high demand in San Francisco, New York City, and Atlanta. No need to go to the moon… yet
So does the crypto market need to make comeback in 2019? Well, yes, but to an extent. I believe that Bitcoin should occupy the $6,000-$7,000 range for the foreseeable future. Chasing the all-time high will only put the focus back on the price, rather than the technology.
This also applies for the altcoins, especially the major ones. Right now, the crypto needs to be dull for a while, in order to be exciting in the future.
* All prices provided by Coinmarketcap
Disclaimer: I own small amounts of Bitcoin and Ether..
