Today I was contemplating the charts on different time scales trying to figure out what lies ahead of the crypto-realm. So I decided to lay down a few points, just to have them on the record for later analysis once the outcome will become known.
From a peak of 812 Billion dollars on the 7th of January, in just four weeks the entire crypto-world lost 50% in value being down to 414 Billion on the 2nd of February. While me personally I don`t find this "market cap" indicator too relevant in terms of what the true value of each token / coin is (or of the entire crypto-realm for that matter), it`s dynamic does have small clues about what is going on. For example, it is worth noting that BTC dominance is down to 34% and ETH is around 21%, with BCH sitting way behind at 5%. For comparison, in February last year we were looking at BTC having 85%, ETH 5% and all the other alts counting for 10%. So, quite a change of the crypto-world in one year in terms of what is more valuable.
While this entire "crash" as some doomsday preachers are calling it might seem a dead song of the cryptos, in my opinion is nothing more than the end of the birth stage and the beginning of the growth stage. We are already 9 years into the blockchain technology, since the 3rd of January 2009 when Bitcoin was "invented" and boy did it teach us some. We saw the limitations of this wonder-kid technology that shook the financial paradigms of central banking and money printing, we saw the amount of greed that could be triggered at a very short notice in large masses of people, we saw scams, hacks, thefts and anything else the human mind can conceive in order to get rich fast. We saw the amount of energy the initial technology needs to function and we soon realize there is simply not enough. What we also saw was a growing interest for improvement, for identifying the bottlenecks and for trying to eliminate them. However the most important aspect noticed was the scarcity of the most valuable resource needed, the human developers able to tackle the tremendously complicated codes of the technology.
Now that all those technical aspects are known, the possible range of applications this technology presents is also known, we are at the point when regulators will step in in order to curb the greed of the masses and to reward the big boys playing by the rules. Going beyond the usual FUD and fake news always present in the mainstream media, there are already forces in motion to set the stage for the next phase. For example, exchanges already started to talk about limiting or even suppressing their retail operations focusing only on institutional clients, coin / token "compliance reviews" are being conducted, tax authorities are quickly drawing up taxation schemes, governments and regulatory bodies are conducting joint meetings and increase collaboration in drafting specific legislation. The limit not to be crossed seems to be the fiat / national currencies / legal tenders.
This leads to the next point, the types of coins / tokens available on the markets. In my opinion we have the payment oriented coins, the value storage coins and the eco-system bricks type of coins. As examples - XRP, BTC and ETH respectively. Of course we still have the scam coins, but we don`t count them in here as they will be coming and going so fast in the future that won`t make any difference. Also, there will be a small percentage of coins / tokens focusing on privacy and anonymity, with the most obvious use case being tax evasion (like today the off-shore paradises) with an unknown future / market cap.
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Now back to the opening part of the idea, it seems the market is at a point of its evolution where it starts to favor the eco-system / building blocks type of coins and to steer away (at least from the growth point of view) from the others. This makes perfect sense based on all the above fundamentals and the fact that politically the technology is accepted while the replacement of the legal tenders is not. Even at the TA level, when we look at the BTC weekly chart we can see the price arrived at the crossroads. It has to decide where to go next. All the momentum indicators are weakening, the RSI is at 50, the MACD just had a death cross and the candles are exactly at the trend intersection, around the 0.618 Fib level of the last bull run. All those point to the middle, saying "BTC is looking for its identity". As outlined above, the entire crypto-world is shifting, evolving, maturing so basically the answer to this "identity" question will be offered by the real use-cases of the technology. The arrival of the ETFs and the derivatives marked the entry point of the "big boys" into the financial part of the market and there the key is stability. We might see price fluctuations up and down, just enough to make it attractive but I doubt we will ever see the huge swings we were witnessing until now. Instead, the focus will be on accumulation and diversification, in promoting the coins / tokens with real use cases values while having some sort of general indicator like the BTC price (at least for a little longer, until the entire market matures completely)
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I had to split the text into several parts as there is a character limit so thank you for your patience and for taking the time to read it. Any comment, idea, though is greatly appreciated. Thank you
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Just a bit off-topic but very interesting nevertheless. On Friday, Dow Jones closed 665.75 points down from the previous closing. How about that perfect number? Not to mention the big "jump" down just just a few days before. Is the stock market ready for a crash? Hmmmm ....
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One more thing that was bugging me for the past day or so ... overnight, most of the major US banks decided to "protect" their retail customers by declining any crypto-purchases by credit card. So ... let me see if I get this right ... the BTC price and along with it the entire crypto-realm lost more than 50% of the market cap in about 4 weeks leaving a lot of small investors with big losses (most likely they panic sold so now they are left with a major credit debt towards the banks), the stock market and the treasury bonds market are about to go down big time and the good banks are closing the door on the face of those retail customers for the only hope they could have had to hedge the fiat losses ... the rebound of the crypto-market. Sounds about right :)
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Oh boy what a day ! DJI almost on the oversold area on the daily and the BTC hit another interesting number ... $6600 . Precisely, right? A, meanwhile some UK banks decided to shut the door on the credit card purchases as well and China censors the access to all crypto-exchanges in the world. Looking forward for tomorrow :)
Not sure if you recall but we had said that BTC was a " leading indicator" for the S@P by about 6 weeks or so and it seems to be playing out that way once again. Not a good sign for the S@P if our
5420 BTC number comes to be. We'll see.
Haceru
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@london55555, yes, of course I remember ... but I thought you said 8 weeks or so ... regardless, the charts are there and we had a week of selling already, both on the DOW and S&P, the yields are rising and all those "just happened" to happen right after the Davos meeting. And we have nice "perfect" numbers, as we were seeing in BTC on Bitstamp as well for a while now (for example, the 00 UTC closing for BTC on the 2nd of February was 8838.83 - note that 2nd of February is also the 33rd day of the year, and the BTC price completed that nice Fib sequence of downfalls 1,3,5,8,11,13; also it was the third fractal formation). Me, I stopped believing in coincidences long time ago ... so this is no different. The only thing I wonder is if they will blame this all on the cryptos :)
NewYork888
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@Haceru, You're correct 8 weeks typo on my part above good catch! Here's another one for you although we haven't really looked at it. The number 8 is the "luckiest" number in the Chinese culture re: 88.com the domain only would be worth about $25 million believe it or not if it were for sale. - with them being such large buyers id be curious to see if "bounces" occur around that 8888 number from time to time.
NewYork888
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@Haceru, p.s. XRP doesn't look like it will hold .87c right here. This name is headed down in a serious way.
Haceru
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@london55555, oh well ... that won`t be a surprise for some of us :)
supernoveau
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@Haceru this is a fantastic commit on the state of play - I love the birth / growth phase and I presume you are referring to S curve adoption.
My mental model of the market is now “currency” (BTC, XMR etc), “smart platform” (ETH, NEO, EOS etc) and “finance/exchange” (XLM, XRP, OMG). I also see a “blockchain-to-market” category (ARK, KMD) but I’m not convinced on this yet - I don’t like sales risk compared to other use-cases.
I wonder if you have any ideas on how this plays out with trading pairs this year? It seems BTC has controlled market as you say and so a fall in its value has affected all others. Do we get to a point soon where more USD pairs allow for example the growth of NEO to occur irrespective of BTC and sentiment there?
I recommend @goldbug1 who has a post currently on shift away from “currency” coins.
Haceru
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@almccann, thank you for your comment and insight. In regards to the trading pairs, that is a good question. So far we only have BTC vs all and then some ETH vs some and USDT vs. some, but only on certain exchanges. Now, with USDT we all know the story and most likely it won`t end up well (like so many times before); how bad, remains yet to be seen. However, this policy is entirely up to the exchanges if it is in their interest or not to widen the scope of the pairs. So far, doesn`t seem to be but me personally I would love to see XRP vs all, since it would be a game changer all together. But, for some strange reason, it doesn`t seem that even Ripple the company is doing much in convincing the major exchanges about this development so ... hard to say. On this topic, it is worth mentioning the new type of exchanges coming up, like ShapeShift which basically do just that, swap coins between them; also there are some blockchain projects that will offer coin swapping as well. On the other side, if we take the FOREX model, we only have a few major pairs there like USD, EUR vs all so it would be quite a show to see this new approach of all vs all. I guess it will level off the market even more, based on the coin values and not by P&Ds.
In regards to the birth / growth phase, is not necessarily about the S curve seen in the charts but more about the life cycles of any product / service, from a more economical point of view. We have design, prototype, beta release, first stable production ready product, PR, marketing, distribution, etc. and here I am talking about the entire crypto-realm, not only about BTC.
I will check out @goldbug1 `s post since I like his style a lot, thanks for the tip
5420 BTC number comes to be. We'll see.