Cryptocurrency is synonymous with extremely volatile price swings and fluctuations. 2018 was no different, with Bitcoin falling from $20,000 to as low as $3,150. A large number of investors who ‘bought the hype’ at the turn of the year have now capitulated, either selling their holdings or losing hope that the market may cycle back around.
While the crypto market may seem on the brink of further downside action, there are a couple of events in 2019 that could switch the narrative and cause a return of the enigmatic bull market.
Nasdaq and Bakkt
At the end of 2017, the cryptocurrency community were certain that the listing of Bitcoin Futures on the CME and CBOE was the event to catapult the price beyond the $20,000 all-time-high. Unfortunately, the listing on the Chicago Board of Options Exchange was actually the top. Price soon cascaded to the downside, culminating in a gruelling 12-month bear market that saw much of the market lose more than 90% of its value.
However, the first quarter of 2019 has brought new-found optimism to the space. Nasdaq confirmed that they ‘will list Bitcoin Futures’ before the end of March, while the Intercontinental Exchange are launching Bitcoin service Bakkt in January, which will also feature a cutting-edge version of Bitcoin Futures.
Huge news for $crypto. It's also remarkable that a national newspaper are breaking crypto/Bitcoin news, it shows that the tides are turning away from the mainstream media FUD campaign.https://t.co/WQU2sPHIkU
— Oliver Knight (@KnightCoinRivet) December 3, 2018
The difference between these two upcoming listings compared with last year’s CBOE and CME listings is the position of Bitcoin and the cryptocurrency markets in general. Last year, the market inflated to an unhealthy level, and this was capitalised upon by those in the legacy trading space. Shorting Bitcoin was far more profitable and low risk than speculating that it would go up further, especially considering Bitcoin has made these parabolic rises followed by 90% declines a number of times in the past.
This time around, Bitcoin has suffered an intense year of downside pressure, resulting in low confidence from even the most persuasive cryptocurrency advocates. When sentiment is at such a low point, it is usually a signal to buy. The risk reward set up of buying, or longing, Bitcoin at $3,000-$4,000 is certainly better than doing so last year at $20,000, so the influx of institutional money may be a trigger for the next bull market.
The Securities and Exchange Commission have delayed their decision on a Bitcoin ETF until late February. This is the final date they can move it back to, meaning that no more delays are possible.
The regulator has had concerns about price manipulation, fake volume, and volatility, but with Nasdaq’s implementation of SMARTS technology, all of the above may be removed from the markets.
Investment firm VanEck and blockchain start-up SolidX are leading the two ETF proposals, which if approved would see a Bitcoin ETF listed on the Chicago Board of Options Exchange.
Revealing why the decision was delayed, the SEC said: “The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change.”
If approved, the ETF would add legitimacy to Bitcoin and cryptocurrency, both of which have been harshly criticised by many in the traditional finance world over the past decade.
Outspoken financial analyst Nouriel Roubini said the following in a series of tweets: “It is indeed laughable to think that useless crypto-currencies or s**tcoins have any fundamentals of value. Their fundamental value is ZERO or actually negative if you price correctly their negative externality of hogging energy and destroying the environment.”
An ETF being approved would prove to the likes of Roubini that cryptocurrency, and the fundamental technology underlying it, is here to stay, and that mainstream adoption is still very much on the horizon.
It is indeed laughable to think that useless crypto-currencies or shitcoins have any fundamentals of value. Their fundamental value is ZERO or actually negative is if you price correctly their negative externality of hogging energy and destroying the environment https://t.co/wsY3Qo1Shx
— Nouriel Roubini (@Nouriel) October 12, 2018
The SEC purging the space of dishonest projects
As well as deciding whether or not to approve a Bitcoin ETF, the SEC have also taken aim at a number of cryptocurrency projects in recent years. The regulator has clamped down on various projects including AirFox and Paragon, who were both ordered to return investors’ money and register their company as a security with the SEC.
While initially this could be seen as a step to halt innovation in the space, ultimately the SEC are attempting to safeguard investors by purging the space of projects that aren’t compliant with regulation and which are putting potential investors at risk.
An unhealthy amount of ICOs launched during 2017’s hype-cycle. Unfortunately, many of which didn’t have the business attributes to be successful. If the Commission continue to clamp down on these inexperienced projects, it will allow the true innovators to prevail, which again will drive mainstream adoption.
0/ Today marks the conclusion of what I'll call "phase one" of the SEC's crypto enforcement strategy. My thoughts on:
– the enforcement actions against AirFox & Paragon
– the statement on digital asset securities issuance & trading
– what to expect in "phase two"
— Jake Chervinsky (@jchervinsky) November 17, 2018
The cryptocurrency space also has an issue with influencers who have been dishonestly touting projects, especially when the prices of digital assets were much higher. Recently, the SEC came after Floyd Mayweather and DJ Khaled, both of whom were fined after promoting ICO projects that were either fraudulent or unregistered securities.
Controversial influencer Ian Balina exclusively revealed to Coin Rivet that he does “worry about the SEC”, suggesting that the regulator may be looking to clean up the space in 2019.
The cryptocurrency community seem to have a fearful view of the SEC. It may take some time for the Commission to earn the trust of the community, but it’s clear that they are ridding the space of scams, Ponzi schemes, and fraudulent coin offerings, all of which is a positive way forward.
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