As the cryptomarket progressed through much of this year, a jump in volatility and a wave of bearish sentiment, following December’s broad-based cryptomarket rally, led to plenty of debate on whether Bitcoin and the broader market gains to record highs back in December was just a bubble ready burst.
Certainly, when comparing to the dot.com era and bubbles of old, more than 1,000 gains in a matter of weeks suggested that the gains were unsustainable and, while the Bitcoin bulls talked up the prospects of Bitcoin hitting the dizzying heights of $100,000 and more before the end of this year, the reality has certainly taken a bite.
Of particular interest is why few if any have mentioned the words bubble and burst, as for Bitcoin alone, a 75% slide from December’s all-time high would have shaken any of the major equity markets into submission.
To put it into perspective, the NASDAQ tumbled by 71% from its peak to trough in the dot.com meltdown and, while few will say that blockchain technology is worth less than the paper it’s written on, the reality is that many of the crypto coins traded across the crypto exchanges today are traded based on a white paper and concept, with few actually successfully transitioning from idea to tangible product. Perhaps that alone should be an alarm bell, particularly for market historians.
Even Bitcoin’s fight to become a viable alternative to fiat money seems flawed, with its lengthy transaction times and higher fees relative to some of the other cryptocurrencies looking for a slice of the real money pie.
So, while we can expect Bitcoin and the broader market to continue to find near-term support at such low price levels, investors continuing to believe that the next crypto rally is just around the corner, one does need to question whether the current market dynamics are sustainable.
Ripple’s XRP has shown greater resilience in the lead into and after the Bitcoin Cash hard fork and much of this has to be attributed to the team’s success in delivering an array of real-life blockchain products that have been adopted by institutions as a means to remit monies cross-border.
The team’s success is certainly far greater than any of its peers and to be fair, one does question why Ripple’s XRP has not replaced Bitcoin at the top of the crypto list by market cap, though it may just be a matter of time now and, if the general trend continues, the Ripple effect may evolve into a wave of support that could accelerate XRP’s ascendancy to the top.
We can expect investors to be licking their wounds following last week’s losses and Monday’s sell-off, which may well provide some early gains for the broader market this morning, but the reality is that investors may begin to wonder whether the latest sell-off and the effects of last week’s Bitcoin Cash hard fork on the broader market is reason enough to hold back on the Bitcoin ETF approvals.
Some institutional investors will be lining up for a piece of Bitcoin at sub-$5,000, but the smarter money may hold back for just that little bit longer, with even the more bullish of the Bitcoin bulls likely to be calling an end to the broad-based market sell-off in hope rather than certainty.
For those that are interested in the numbers, the cryptomarket cap has tumbled from last December’s $828.54bn all-time high to $159.72bn and, while this is obviously not an all-time low, it’s 2018 low and, when considering the continued rise in the number of cryptocurrencies, this market has been going in reverse through the year and it may take more than the SEC to stop the rot.