Everyone in crypto is looking for a reason as to why the market has been decimated all year. All sorts of explanations are given from "its a natural correction" (This is not an answer, it is akin to saying "Why is water blue? Because it is wet"), to FUD, to lack of regulation. I want to posit a theory that I haven't seen anywhere and I have no clue why not. Pairing the following two metrics is a fascinating thought experiment.
The first metric is in the ICO space. ICOs have been absolutely massive for fundraising this year. $6.3bn worth of BTC and ETH have been raised for different crypto based projects. Some of the ICO funds are probably liquidated within the first few months to cover costs of product development in USD. More is probably sold as time goes on to cover the losses in value of the currencies. Some is most definitely Hodled.
Lets look at the other side of the equation... the total trade volume per day. Eyeballing it, it looks like on average this year the daily trade volume of crypto has been around $20-30mm. There have been 186 days this year. Total volume this year in dollar terms is somewhere around $3.7bn-$5.5bn. Slightly less than the total amount raised by ICOs.
Lets assume that the average ICO has liquidated just 1/3rd of thier hodlings into the dollar. This would equal a selling power of $2.1bn total or roughly 38%-57% of the sell side pressure. Couple this with comparative expensiveness of mining that we have seen. We have something concrete which we can attribute these gigantic downward pressures on the market.
What to do about it? Honestly we are best served if we play the waiting game and everyone who bought into poorly thought out ICO products gets burned. The market will discourage stupid investing. Something we have been working on to combat this issue is our diversification software at Consensus Solutions. We are currently launching with the goal of exposing more people to the industry and keep users out of relatively high risk projects. Check us out at www.Cryptex.Services... (We are going through a re-brand so we will be changing this soon)
TL;DR
ICOs are probably the reason that the market has been decimated. Be very careful investing in ICOs. Over time the market will correct stupidity. Check out our portfolio allocation software at www.cryptex.services.
