How crypto-markets have changed since 2015

With price of Bitcoin reaching almost 14 000 USD, technical analyses that could have been drawn to reproduce the 2015-2017 pattern are definitively to be abandoned.

The reversal of a trend

For whichever reason you are ready to believe, the reversal of the trend towards growth period has been faster and more vigorous than people would have expected. Probably we are not going to take much risk in describing as the fundamentals that investors / speculators psychology currently believe in mid term price increase. This drives enthusiasts to be reluctant to sell, while opponents are just out of the market (so, have no or little influence on it) and a wave of entrants is seeking to buy crypto-assets.

Key observations

Since the observable events obviously follow a different path, let’s take a minute to reflect on what the differences are between 2019 and 2015?

  • In 2015, no newspaper / websites / channels, or so few, were talking about Bitcoin, let alone Ethereum or any altcoin. Today, the press knows that talking about crypto will sell paper, and mainstream media are exposing the price movements, probably creating a positive feed-back loop that did not exist 4 year ago. This may explain part of the huge dynamic in the trend since beginning of April.

  • The viral effect from enthusiasts in their environment may not be linear as a function of their number or proportion. Professionals, especially traders, also have entered the field massively since then, (and it cannot be excluded that some try to manipulate the markets). Actors have gained better understanding of the technology and of the deep nature of the crypto-assets they are getting into, which may have the effect to quench some of the hype phenomenon that is fueled by non-controlled “Fear Of Missing Out”, so make the whole environment maybe a little less volatile.

  • Due to the unpreceded exposure gained by Bitcoin, Ethereum, XRP, etc, the kind of people that are entering or considering entering in the field is changing, and their dynamism of action as well as the depth of their pocket cannot be the same, even if their psychology were similar – which they are not. We will touch that later in the report, but that might be the actual real change compared to 4 years ago.

  • Access to cryptocurrency is today democratized, if not easier than in 2015. Exchange platforms have matured, the user interface and trading facilities has been improved on all of them. The inflow of money in the sector remains a crucial point, but it is a fact that more service is available than ever to get in and out. Hacks continue to happen, but they represent a tinier proportion of the capitals handled, platforms fix the weaknesses, and malicious activities news are no longer badly hitting the markets.

  • In terms of trading behaviors, for similar price levels, we observe much higher volumes of exchange on the platforms, almost tenfold according to CoinMarketCap; so even if much of it is fake today, probably at the time a good fraction was fake already, and we may safely say that there is a significant real increase in activity. That is certainly fueling volatility today, with a faster dynamic than could be observed in the previous cycle.

  • Use cases and concrete adoptions are still weak, but growing pretty exponentially. The pace of launch of businesses and services using the technology is mind-blowing compared to what it looked like one year ago. This is another feed-back loop that was clearly not so powerful in 2016.

  • Governments and regulators have taken positions regarding cryptocurrencies; not everything is fixed and threatening declarations from officials are going to resume if not to gain strength at measure that the price of cryptocurrencies go up. But the past 2 years have shown that Bitcoin ownership and payment use was not likely to be banned in democracies, so the legal environment somewhat firmer than it was. In the same time, the concern that BTC & co poses to officials is going to grow with its adoption level, which is likely to impact its growth pattern and has the potential to curve down the exponential behaviors we have been used to.

Check the full version of Blockchain Quarterly (q1-2019) report for more Insights.

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