Crypto Market In The Doldrums

Crypto Market In The Doldrums

Swissquote Ltd  | Mar 16, 2018 19:16

The entire crypto market has remained under constant pressure for the last couple of months. Yesterday, the total market capitalisation fell to a 4-week low as it reached $313 billion. Since the massive sell-off of mid-January, the market sentiment is in the doldrums and it seems that the situation will never improve. Is it because of regulation? Google (NASDAQ:GOOGL) banning crypto ads? Mt. Gox trustee situation? This is most likely a bit of all those factors.

Last year ended on an upbeat note as investors across the globe rushed into cryptocurrencies. Investors failed to perform any due diligence and invested massively in cryptocurrencies, as they feared of 'missing out' on the trade of the decade. Unfortunately, the future of crypto is still quite foggy and the latest developments did not give us a clearer picture.

The honeymoon is over and it is time to face reality: many coins will die this year. However, coins are not all equal as the factors mentioned above will impact them differently.

In my opinion, the regulatory factor is the least significant right now as many regulators (the SEC/CFTC, Korea, Japan, etc) have clearly recognised that the blockchain technology would thrive in the near future and revolutionise many business areas. In short, it is already priced in. However, the future of pure payment tokens, such as Bitcoin, Litecoin or Dash, is less assured as their future depends heavily on central banks’ decisions. Indeed, payment tokens are direct competitors of central banks, and the odds are good that the latter will not give up their right to print money and control money supply.

Regarding the Mt. Gox trustee case, there is no doubt that it keeps investors on their toes. Mr. Kobayashi sold over $300 million in Bitcoin and still has 168,177 Bitcoin (roughly $530mn as of today) and 168,177 Bitcoin (roughly $530mn as of today) and 168,177 Bitcoin Cash to unload. Given the relatively thin liquidity of the market (compared to traditional markets), the sale of these Bitcoin could trigger another sell-off or at least prevent the prices to rise again. There still a lot of uncertainty as to how, and when, Mr. Kobayashi will operate in the future.

Finally, many companies have finally realised that those blockchain startups were actually coming for their business. Therefore, they are trying to buy time by slowing down the broad adoption of the technology, in the hope that they could catch up.

So, what investors should do? First, I think it would be smart to invest in the long-term rather than going for the short-term gains. There is no doubt in my mind that blockchain will be broadly adopted in the near future. However, this won’t be a homogeneous phenomenon. More specifically, investing in pure payment token is a much more speculative bet, as their future depends heavily on central bank and regulators decisions. Thus, the future of pure payment token is quite uncertain, and therefore trading them is more speculative. On the other hand, utility token, such as ETH, OMG, NEO, etc, have a brighter future in my opinion, as they are intended to provide access digitally to an application or service.

Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.

Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments

Swissquote Ltd

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