The August lull in the cryptocurrency market gives hope for the imminent resurrection of bitcoin. However, there are no guarantees
The capitalization of the cryptocurrency market in the first two weeks of August lost more than 30% and fell below the $200 billion mark.the fall is mainly due to altcoins — cryptocurrencies that appeared after bitcoin. For example, only for a month Ethereum and Ripple lost 41%, EOS sank by 38%, and TRON was in the red at once by 48%. Bitcoin for the same period has not changed, falling by a symbolic 1.66%.
Why does bitcoin not fall?
The stability of bitcoin in recent weeks is caused by a number of factors. First, the news about the postponement of the decision to register a number of ETFs (funds traded on the stock exchange) on September 30, although it was perceived negatively, actually speaks about the serious attitude of the us regulator and the desire to understand the issue. The absence of a quick ban is rather positive and indicates a high probability of creating this product in 2019. ETF will allow you to invest in cryptocurrency through a classic exchange account. Technically, the purchase of bitcoin will be as simple, safe and cheap as the acquisition of shares in Apple or McDonalds. This will allow investing in this new asset class for retail investors, who previously could find the process of buying cryptocurrencies too complicated, as well as institutional investors, for whom only instruments traded on registered securities exchanges are available.
Secondly, bitcoin is a kind of analogue of gold in the economy of cryptocurrencies: players buy it when other digital currencies are too scary. Many altcoins in principle are not traded for ordinary dollars, euros or rubles, their price is determined only in bitcoin. Accordingly, selling such cryptocurrencies, you, in fact, buy bitcoin for them.
Finally, do not underestimate the weight of the brand "bitcoin". He is more than 10 years old, he was the first successful mass implementation of blockchain technology, which has passed through dozens of cycles of takeoff and collapse of the cost. In principle, any acquaintance with the world of cryptocurrencies begins with it, while large banks and investors are no exception. Bitcoin has a fairly liquid regulated futures market, and the first ETF, if created, is likely to invest in bitcoin.
Reasons for selling altcoins
You can select multiple drivers of decline. First of all, there is a crisis of confidence in young cryptocurrencies and ICO: July was a failure to attract funding for new projects. According to our estimates, the amount collected through the ICO amounted to $672 million against $945 million in June, the number of projects fell from 94 to 75. Over the past six months, several hundred projects have ceased to be updated and function, it is expected to be at best an attempt to earn easy money, at worst — outright fraud. Other projects continue to be afloat, but are limited mainly to marketing in social networks, adaptation of their products remains purely symbolic. Since most ICO was carried out on smart contract platforms, in particular on the basis of Ethereum, the fall in demand for tokens of these platforms looks very natural. For Ethereum fall and all of its competitors, such as EOS, TRON, NEO, etc.
The fall is aggravated by the sales of ICO organizers and miners. Most of the recent ICO attracted funds in other altcoins (Ethereum), now the organizers are forced to get rid of cryptocurrencies to support their activities. While others simply derive all the assets from the ecosystem of cryptocurrencies cashing its revenue from ICO.
Miners are rewarded for their activities to maintain the functioning of blockchains in cryptocurrencies, and the costs (electricity, rental of premises, loans) in their Fiat currency. While prices were high and miners had a high rate of return, they could sell only a small part of the resulting cryptocurrency, holding the profit in the expectation of further price growth. But with the current prices, many are already at a loss and are forced to sell not only the reward, but also old stocks.
What's next?
We observe strong pressure in altcoins from a number of sellers with almost complete absence of buyers. In such circumstances, the falling trend will be in force. Only two factors will be able to correct the situation: either the prices will become so low that the implementation of the crypto currency for Fiat will be deprived of any sense, or new money will come. The latter can happen after the ETF registration, which is what all the bitcoin community is waiting for. Obviously, many cryptocurrencies will simply cease to exist in a year, but those that will remain afloat, given the low liquidity and capitalization can show multiple growth from the current levels.
Buying altcoins looks now more than ever asymmetric rate: the fall is limited to 100%, and the increase in the value of individual coins can be 200-300%. However, the probability of these events is not even known to anyone.