Top 15 Cryptocurrencies Experience Extreme Volatility For Investors in 2018
Cryptocurrency Volatility – Why Investors Have Shied Away from Cryptos This Year
Cryptocurrencies were all the rage in 2017. Everyone who had some spare cash as well as others who had access to loan facilities wanted to get in on it, and make some serious cash.
In fact, cryptos outperformed every financial asset since the history of man in one year, yielding a 3,300 percent return on investment. To help you see how huge that is, consider that the stock market does about 7 percent year on year, and will take many years to match a performance like that.
From an almost $18 billion market cap in January 2017, the sector went on witness an almost $614 billion market capitalization in December 2017.
Unfortunately, the market’s performance hasn’t been as impressive this year. If anything, the market appears bearish, with many of the cryptocurrencies losing almost 80 percent of their value since February 2018.
In fact, the most popular cryptocurrencies have seen huge value depreciation in the last 7 months, with many trading for under 30 percent of their value at the beginning of this year. To show you the current state of the top cryptos now compared to January this year, let’s do a quick comparison:
- Bitcoin now trades at 32 percent of its January price
- Ethereum trades at 20 percent
- Ripple trades at 8 percent
- Bitcoin Cash trades at 12 percent
- EOS trades at 21 percent
- Stellar Lumens trades at 23 percent
- Litecoin trades at 15 percent
- Cardano trades at 7 percent
- Ethereum Classic trades at 31 percent
- Monero trades at 19 percent
- Tron trades at 7 percent
- IOTA trades at 8 percent
- Dash trades at 11 percent
- Neo at 9 percent
Bottom line, the market currently sucks with many dropping in value.
Why Did This Happen?
The current market sentiment is largely bearish, with many investors either adopting a wait and see attitude or outrightly abandoning the market.
Others are simply “abandoning ship” and selling off their assets, often at a huge loss. Bottom line, there’s not a lot of capital going into the market at the moment because of a few crucial reasons. Some of these include:
Poor Investor Sentiment
How investors feel about a certain industry will often determine the industry’s asset performance. In this case of cryptocurrencies, investor sentiments aren’t exactly positive.
Many people currently have their monies tied down in cryptos that they have invested in, most of which have significantly depreciated in value. As a result, it appears that most investors are currently lacking confidence in the market.
This is not surprising seeing as many jumped on the bandwagon in the hopes that they can make a quick buck. For most of them though, they joined when crypto prices were at their peak, which means that they did right at the time the prices of cryptos were correcting.
Unfortunately, the prices haven’t returned to the same points for most cryptos –and probably won’t do so for a while.
Non-Participation of Big Corporate Investors
One of the factors that drove the prices of cryptos last year was Wall Street money. The industry enjoyed a huge inflow of capital from Wall Street companies that had issued futures contracts for bitcoin.
For an industry that had been largely driven by investments from regular investors, this proved effective in driving the prices of cryptos up.
Unfortunately, most of the big monies were meant for short term investments. These companies created huge buy and sell walls that ultimately benefited them as they exited the market.
The sudden exit of these big money corporations resulted in significant drops in the prices of cryptos and has remained that way for a while now.
Proof of Concept Problems
All cryptos face something called the proof of concept conundrum. This is particularly in reference to blockchain, the technology powering cryptos in the first place.
This technology has proven itself incredibly useful in eliminating third party providers, securing data in a transparent manner as well processing financial transactions across the world quickly, in real time, and at a far cheaper cost than traditional costs.
The only challenge with this however, lies in its widespread or global use. Most blockchain tech can and do thrive in small scale testing environments and demos. In those controlled environments and scenarios, they tend to do really well.
But, when it comes to deployment on a huge scale, many blockchain projects have fallen short of expectations. This is a big problem because this is the single biggest challenge limiting the massive adoption of blockchain and its products.
The ability to successfully scale is going to blow up blockchain’s popularity and accelerate its widespread use by both individuals and businesses looking to adopt the tech. Until this happens, blockchain’s growth and adoption will most likely, be limited.
Unfortunately, we’re not likely to see this happen soon because businesses are reluctant to adopt the tech for some of their business. And massive adoption is only likely through the frequent use of its products on a massive scale.
Businesses need to be willing to give the tech a try before this can happen. We can only wait to see what happens in the near future as this is resolved.
Cryptocurrency Security Vulnerabilities
Another factor that could be affecting the tech and the popularity of cryptos as a whole, is the security of cryptos and blockchain.
Blockchain itself is quite secure, the only challenge lies in the security of cryptos. For instance, over $1 billion in cryptos were stolen between January and May this year by hackers and cyber criminals.
Even though the bigger part of the stolen cryptos was that of the token Monero (XMR), the reality is other cryptos were also stolen. The sheer volume of those stolen is enough to make people wary of investing in an asset category that the founders can’t even be bothered to properly secure them.
Worse still, the stolen cryptos are hard or almost impossible to trace and recover because not only is Monero a privacy based cryptocurrency, it’s also very hard to trace where the funds went to.
Sure, you may be able to see the originating and destination wallet addresses, but many of these don’t have any verifiable identity behind them. And even if they did, there’s no central database where you can compare the data.
Also, the SEC’s repeated warnings about their inability to help recover any lost cryptos doesn’t engender much trust in cryptos.
Bottom line, crypto security is not yet bulletproof, although many cryptocurrency founders are doing a great job of bolstering the security of their individual tokens and projects.
Tech Adoption Problems
Let’s be honest, unless you’re comfortable or well versed in cryptocurrency and blockchain, chances are that the sector and its many terms sound like gobbledygook.
The sector and the tech itself is currently murky waters to many newbies and intending investors. This has resulted in a slower adoption of the technology; particularly crypto’s underlying technology, the blockchain.
There’s need for a massive education campaign on the viability and usefulness of the technology as well as its very many benefits. Once people understand just how it works, chances are there’ll be a more positive response to the tech, resulting in less volatility.
This will happen because people will see beyond just cryptocurrencies, thus ensuring that the technology becomes better entrenched.
Every new technology goes through a vetting phase when the big money corporations determine if it’s worth the investment or not. Cryptos and its underlying technology is in that phase now.
The good news is that it’s gradually gaining momentum and enjoying a slow but steady growth. In the nearest future, we’re likely to see even more widespread adoption of the technology.
Too Many Cryptocurrencies
And many of them don’t even have proven concepts. This combined with the rising number of ICOs makes it look like the market isn’t a serious one. As a result, there’s little or no investor confidence in the industry.
There’s no vetting or validation process for many of these cryptos. Unlike the stock exchange where shares are issued after a company is established and proven itself worthy, ICOs and cryptos are not.
This has resulted in the rising spate of scam coins strictly designed to fleece people of their hard earned monies. Many of these coins haven’t grown beyond the idea phase.
Once there’s a way to vet all new coins and an industry standard of sorts established, more investors will be interested in investing. Until then, all intending investors have to do their due diligence.