Going into the fall of 2018, Bitcoin was still trading above $6,000 after having survived multiple attempts to dump the price below a market cap of $100 billion. This finally happened during the last two months of the year, but since the $3,100 low, we have seen the market rally, and Bitcoin keeps bumping into resistance at around $4,000.
At the same time as the Bitcoin sell-off, the whole crypto-based economy took a huge hit in terms of valuations. From a total crypto market cap of over $200 billion, how many could have said the industry would shrink by half following a 60-day sell-off? The market found support in mid-December 2018 at that psychological $100 billion mark.
Since that total market cap low, we have seen both Bitcoin and the total crypto market cap fight back strongly to reach $4,000 and $139 billion respectively. A surprising period of low volatility during this time frame has seen the BTC dominance index (the percentage that Bitcoin makes up of the total market cap) trade stably between the 50% to 55% range.
Other key areas of support for the Bitcoin price at the moment come in the forms of both the 50 and 100-day moving averages, which previously rejected the BTC market in early November last year.
What exciting developments have been driving the recent move up?
In a similar 60-day period in late 2017 to early 2018, we saw (a now obvious) speculative boom add an extra $500 billion in market value, taking the crypto industry and its flurry of planned innovations for B2B and B2C tokenised business models from $200 billion to over $700 billion in market cap.
Let’s set aside any talk about how friendly or unfriendly the regulatory landscape has been for Bitcoin and cryptocurrencies over the last few months. A host of new user-facing platform launches and positive protocol-level progress in scaling, privacy, and also smart contracts have undoubtedly been success stories since the industry hit a potential bottom in late 2018.
The Lightning Network, Bitcoin’s Layer-2 scaling solution, and more importantly the infrastructure around the project, seems to be giving Bitcoin a much improved transfer capability over a decentralised network of nodes, channels, and code that is all trying to talk to each other to figure out the optimum mesh network to achieve scalability for millions of potentially minuscule transactions every second.
dApps, Lapps, and apps
Another key area of significant growth has been in the various types of apps coming to market that encompass various ways to interact directly with the burgeoning tokenised economy. An increase in dApp growth has been witnessed with an influx of daily users and contract volume across a range of decentralised applications launched on the Ethereum, EOS, and Tron networks.
On top of this, the Lightning Network has also seen its own specific selection of games and micropayment applications take off in recent months, with the team behind the popular BlueWallet saying that 40% of the 16,000 people who downloaded the Lightning wallet had played around with the in-built ‘Lapp’ directory.
Finally, many exchanges and companies have been coming to market with a host of specific apps to improve trading or interaction with blockchains. All these apps share a common trait of interacting with open and, in most cases, highly decentralised protocols to bring the magic and transparency of the free market to the palms of participants all across the world.
Capitulation lower is still possible
Even though a bullish case has been made in this article for the crypto market in general, it’s difficult to ignore those with their trading hats on who look at the chart and only see support and resistance levels from the many years that Bitcoin spent below $1,000. It’s true that we may see a ‘quick wick down’ to really test support at $1,800 or even $1,150. This will give the market a chance to see the non-believers capitulate before the start of a new bull market to eventual all-time highs.
If we did see a bullish break through the slowly descending line of resistance between $4,200 and $4,000, we may see some much missed FOMO come back into the market. The smart rhetoric (of the always cautious investor) seems to be that Bitcoin and crypto markets are almost certain to become a trillion dollar industry (like it nearly became in 2018).
Institutional money buying the dip?
The question will inevitably be whether big money institutional players (who are long-term believers in this space) will keep their money on the sidelines to ‘buy the dip’ between $3,000 and $4,000 or whether they will wait for the real industry dip that has yet to come.
I would say it’s 50:50 at this point in regards to whether the late-2018 low will hold – but my advice to all long-term accumulators in this space would be slow and steady (and regular) buys is still the best strategy, rather then trying to fill that bag up during a possible capitulation that may or may not be coming up over the next few months.