Why BTC Trading Is Going Down and How It Can Recover

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If you have been following the cryptocurrency markets at all, you can probably name at least one reason why the market is currently in decline. In case you haven’t turned on your TV or streamed the internet at all these last 6 months, here’s a list of reasons…

July 18, 2018 by
Why BTC Trading Is Going Down and How It Can Recover

While daily chart observers wonder whether Bitcoin’s most recent movement is the beginning of a bull run or just a fake rally, many so-called “expert” investors do not refrain from making predictions for the long-term.

Tom Lee: BTC to reach $22,000

In July 2018, Tom Lee, senior partner at Fundstrat, estimates Bitcoin will hit $22,000 by the end of the year.

Clem Chambers: BTC to reach $20,000-$100,000

In July 2018, Clem Chambers, CEO of ADVFN, thinks $20,000 is the most probable value for Bitcoin by year end, but also believes $100,000 is very probable.

Arthur Hayes: BTC to reach $50,000

In May 2018, Arthur Hayes, CEO of BitMEX, estimates Bitcoin will hit $50,000 by the end of the year due to a regulatory push for ETFs.

John McAfee: BTC to reach $1,000,000

In November 2017, John McAfee, founder of McAfee AntiVirus, predicted $1,000,000 by the end of 2020.

Despite these crazy outlandish predictions, the market has been in a slump since the start of 2018: from a high of $17,000 in January to a low of $5,800 in June. In this article we will discuss two things:

  1. The number one reason why we are in this major market slump
  2. The fastest way we can get out of this slump

Number One Reason for This Major Market Slump

If you have been following the cryptocurrency markets at all, you can probably name at least one reason why the market is currently in decline. In case you haven’t turned on your TV or streamed the internet at all these last 6 months, here’s a list of reasons:

  • Market manipulation
  • Fear of regulation
  • Hacking incidents
  • Bitcoin was a bubble
  • And the list goes on…

The future of crypto is unpredictable at best, but by far the greatest market limiter of Bitcoin has been increased competition.

Related: Reasons Why Cryptocurrencies Gain Value
Bitcoin vs Litecoin vs Ethereum 2018

Every time a crypto investor sells his Bitcoin in order to invest in an “ICO”, he is essentially putting Bitcoin on “hold” and hoping for this new coin to skyrocket. This places a long-term strain on the market, as these investors will likely not cash out for an extended period of time. Additionally, once these “exotic coins” fall to zero, Bitcoin will be permanently affected because these funds can never re-enter its ecosystem, and the entire cryptocurrency market will go down alongside Bitcoin.

Fastest Way Out of This Slump

Since so many existing investors are shifting away from Bitcoin and hoping to hit the jackpot with new alternative coins, much of the market’s existing capital pool is stagnant and illiquid. In December of 2017, daily trading volume for Bitcoin fluctuated between $7 billion to $20 billion. Now, in July 2018, daily trading volumes have declined to $3-5 billion.

Weekly BTC trading volume between January 2018 to July 2018

Weekly BTC trading volume between January 2018 to July 2018 has been gradually falling.

 

Since most of these investors are sidelined from BTC for now (maybe forever in the case of the thousands of “scam” coins) the only way out of this slump is through an influx of new investors. Specifically, an influx of institutional investors would be the fastest way out of this market slump.

On July 3, Coinbase announced that its institutional-grade crypto platform was finally live, resulting in an 11.4% surge across the entire crypto market. But the market has far from recovered.

Requirements for Institutional Money

Currently, there are certain impediments in the cryptocurrency market that is preventing institutional investors from entering.

Regulation

The single greatest impediment to institutional investors entering the crypto space is the lack of regulatory framework. Currently, hedge funds simply cannot invest their clients’ funds into the crypto market the same way a retail investor can. Most importantly, institutions need to be SEC and FINRA compliant. However, until a proper framework is put in place, these issues will continue to delay mass entrance of institutional money.

Security

For most investors, the current infrastructure for safekeeping private information is not super secure. There seems to always be an issue with the custodian, and KYC procedures are not very safe. Once the SEC becomes fully transparent on what regulation and procedures are required for digital assets, investors may feel more secure with cryptocurrency investments knowing that custodians exercise more strict processes. Coinbase’s introduction of their custodial service for institutions is a great step forward.

Liquidity

Institutions often execute very large orders in order to minimize transaction fees and maximize profits. However, a single large order in today’s market can move the entire market because most order sizes are too small relative to institutional appetite. As such, many large institutions are either sitting on the sidelines or merely dipping their toes in the water, buying with only a small fraction of their total portfolio. Coinbase, with their reputation and connection to institutions, may be capable of solving these issues and allow the market to buy and sell in much larger quantities than what is currently possible.

Final Thoughts

Institutional money isn’t going to save bitcoin, buy retail investors’ dying altcoins or spearhead a decade-long bull run. But it will certainly add legitimacy to the markets and in the process bring volume back to the bitcoin market. Institutional money will propel Bitcoin into becoming the investment vehicle and device for financial empowerment that it intended to be.

“B2B reporter – Content Manager – Contributor – Fintech – Blockchain – Cryptocurrency”

Simon Chou is a B2B reporter and content manager specializing in technology and finance. He has worked with many clients in the fintech and blockchain space. He holds investment positions in bitcoin and other large-cap cryptocurrencies, and has been reporting on cryptocurrency since 2017. Currently, Simon is the content manager for a major cryptocurrency exchange @HybridBlockHQ.

Name Price
Bitcoin (BTC)
$10,571.82
Ethereum (ETH)
$224.20
Bitcoin Cash (BCH)
$311.65
XRP (XRP)
$0.323972
Litecoin (LTC)
$99.78
Cardano (ADA)
$0.058723
IOTA (MIOTA)
$0.306109
Dash (DASH)
$111.29
NEM (XEM)
$0.068293
Monero (XMR)
$84.13
Stellar (XLM)
$0.088485
EOS (EOS)
$4.12
TRON (TRX)
$0.025766
Bitcoin Gold (BTG)
$27.00
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