The last trading week of 2018Dec 28, 2018
The end of the year is always the time to take stock and determine perspectives for the next year. 2018 for the cryptocurrency market, as well as for the whole financial markets, has become remarkable. It was neither good nor bad. We will try to highlight the main points and define the perspective for 2019.
Most crypto investors consider 2018 as adverse. The objective reason for such an assessment is the decrease in basic cryptocurrencies’ price by more than 80%. It means that investing $100, an investor could return up to $20, let alone profit.
However, it is extremely difficult to ignore the rapid development of technologies and infrastructure. For example, RippleNet will be used by the National Bank of Kuwait.
It is worth noting that Ripple is the second largest cryptocurrency by capitalization. A number of the largest payment systems, as well as banks around the world, are testing various forms of using cryptocurrencies and related solutions. Summarizing this information we can note the rapid development of infrastructure.
Another important factor is the substantial development of the legislative framework, which allows the stock and commodity exchanges to create financial instruments based on cryptocurrencies. A number of countries have already issued their own cryptocurrencies. For example, Venezuela has the national e-currency – El Petro. However, despite the active promotion by government of El Petro, we may observe not the El Petro’s growth, but the rapid increase of the BTC volumes of trades.
According to Henry Arslanian, the executive director of PwC, the cryptocurrency ecosystem is expected to undergo significant changes in 2019. Improving the legal framework and regulating this industry enhances security for its participants.
All this will help to attract institutional investors and strengthen the industry.
However, in this case, it is necessary to create an investment instrument that meets the following requirements: increased security, high liquidity, convenience in use for large investors. ETF fits these criteria, for the launch of which dozens of companies and exchanges are fighting.
Despite Henry Arslanian’s optimism, there are still many serious risks and bearish fundamental factors. Therefore, it is difficult to exclude further reductions in the cost of the TOP-10 cryptocurrencies and, as a result, the market capitalization.
One of the powerful fundamental factors is the decrease in mining profitability, and in some individual cases, mining becomes completely unprofitable.
Recently, there was a rumor that one of the largest mining companies Bitmain Technology has fired more than 50% of its employees. It is evident that this company has a large number of Bitcoin Cash and Litecoin on its balance, the sale of which is capable of putting additional pressure on the market. In this case, the fall of the giants puts pressure on the cryptocurrency market.
After all, not only Bitmain Technology has problems, but also all other mining companies and private miners. All of them are forced to sell accumulated cryptocurrencies in large volumes, as their price has declined markedly, strengthening bearish sentiment in a falling market.
In the first half of 2019, the decline in basic cryptocurrencies may continue. It is difficult to predict the pace of their decline, but time has not yet come for the growth. However, the market has great potential in the long term. The most optimistic scenario includes price recovery starting from the second quarter of 2019.