Top 5 Influences That Created The 2018 Cryptocurrency Bear Market
The cryptocurrency market is reaching new lows this year after reaching all time highs in January, 2018 and December 2017. At the moment, the total cryptocurrency market capitalization is close to $200 billion dollars when at the beginning of the year it was very close to touch $1 trillion dollars.
Distributed Global, an important and recognized financial company that specializes in digital and blockchain assets provided some insights about the current market problems and bear trend and why it expects it to bounce in the near future.
The financial firm explains that the investors were responsible for 300 percent growth on the entire market capitalization at the end of the last year.
About it, Jonathan Cheesman, Partner at Distributed Global, explains:
“The ‘get rich quick’ retail inflow in late 2017 was the largest capital inflow that crypto has ever seen, as the aggregated market cap grew by 300% in 3 months to January 6th this year! FOMO was a huge driver and unfortunately, most of the purchases are now underwater.”
Until now, institutional investors were not able to enter the market and indeed, they are waiting even now. Governments and regulatory agencies need to provide clarity in the market and create good regulatory environments.
But companies need to create custody and insurance services for institutions to start placing their funds in the crypto space.
But now, the firm is convinced that the new capital inflow is coming from institutional investors and specialized hedge funds. It is important to mention that during the last months, an important number of cryptocurrency hedge funds started to operate in the market, even when the amount of funds invested are still low.
Cheesman keeps analyzing the market saying that a lot of the early stage investing done during the year is currently locked. This implies that a substantial amount of supply will be sold in the market in the near future.
At the same time, mining is an important and persistent supply channel for proof-of-work (PoW) dominated environments, something that creates pressure in the prices. Miner sales are also difficult to predict, and some of them are selling almost 50 percent on average.
The fees that exchanges take are also an important factor that puts pressure in some virtual currencies. But it is not clear how much of the fees are sold.
Binance, one of the most important cryptocurrency exchanges around the world in terms of trading volume, may have $1 billion dollars profits in 2018 alone. Moreover, there are over 500 crypto exchanges operating in the market.
Furthermore, taxes are also creating pressure on the prices. This is also a barrier for retail investors.
Moreover, Initial Coin Offerings (ICOs) had an important run during the first part of the year, moving more than $18 billion dollars. And some of them are starting to liquidate the ETH raised during the ICO and crating further pressure on prices on the market.
All these factors are delaying the bull market to happen. The price momentum passed but in the future it will be possible to see a new bull run. Distributed Global marks that hype cycles are unavoidable and that the market is still dominated by those who build the technology.