The Crash In Cryptocurrencies May Not Be A Bad Thing
With speculators keeping a keen eye on cryptocurrencies for the new year in 2019, there have been negative sentiments brought on by a decline in cryptocurrency strength witnessed over 2018.
We look at the cryptocurrency market in context and look to the future of what cryptocurrencies will bring in 2019, where the light appears at the end of the tunnel in what experts are saying will be a bullish market.
Why the decline in cryptocurrencies and what it predicts?
Cryptocurrency is volatile by its very nature, together with a decline in its strength in 2018 we have also seen a decline in trading volumes which have continued through the year, causing many cryptocurrencies traders to lose interest in the markets.
This is a good sign. Much the same as all business cycles linked to technological innovations, such as cryptocurrencies, it is triggered by phases of investment and new opportunities in terms of market and employment. A phase of market expansion usually occurs along with tech innovations and causes the market to boom.
As the technology matures in the market and more investors jump on board, it is followed by a phase of saturation. A recession which usually follows the boom is a natural correction in the later stages of the business cycle which pares off excess investment.
Recessions are a normal condition to a market economy as they weed out the weakest players or those with excess leverage who choose to remove their investment and look elsewhere.
The cycle then repeats itself. The cryptocurrencies cycle is currently at this stage with some already predicting the next phase as being a pending bull market.
Speculators do the opposite of sentiment. Expert advisors in the cryptocurrency market with a long view on current volatility are advising investors not to be influenced by sensational media reports and most importantly not to panic.
Rather they advise investors to remember Bitcoin’s history and the cyclical nature of the growth of bitcoin where often these corrections provide the best buying opportunities. Bitcoin’s 2018 weakness must be taken in context. The only time Bitcoin saw a setback was in 2013 when the blockchain was unreliable for a few hours due to incompatible versions of the software. It was fixed swiftly and now for over five years, Bitcoin has been operational and reliable ever since.
History also shows us that in the past, sell-off of bitcoins has been followed by significant recoveries in a short space of time. The recovery period offers significant opportunities worth the risk for investors to add to their positions, even as the market continues to decline.
Today’s weakness must be seen as an opportunity for new investors to join the cryptocurrencies platform and start acquiring assets at low prices.
Let’s look at reasons for cryptocurrencies decline:
The current declines in cryptocurrencies can be attributed to certain actions in the market as a result of market corrections brought on by the offloading of retail investors. With many people making a lot of money on cryptocurrencies, they are having to pay taxes on their trades and are most likely taking the money out the market to cover their tax contributions.
Value and Volatility
Bitcoin's value is dependent on the amount of demand and supply in the market.
Bitcoin is a commodity that is traded for goods, services and value produced. The price of Bitcoin is not the same as its value, however. Bitcoin price is determined by the market in which it trades: by means of supply and demand, the same way an ounce of gold is determined for example.
Due to business cycles and the volatile nature of cryptocurrencies – and the fact that it is in the early stages of existence - prices can fluctuate in a volatile manner without anyone knowing whether it will go up or down in the next days, weeks or years. It is only on the long-term time scale that investment percentage returns can be better determined.
For bitcoin, it is about knowing when to enter the market along with current industries technological advancements. On a long-term vision and with a positive sentiment for the new and exciting secure cryptocurrencies expected to come onboard, it is percipient to see how they will eventually be adopted into countries as a currency for mass adoption and as a new currency that will bring new economic order as a digital currency.
Increased Adoption
Despite there currently being a low market sentiment, the cryptocurrency markets are seeing increased corporate and institutional adoption that is adding to the underlying strength of the markets.
As businesses see opportunities for cryptocurrencies and get on board due to its ever-increasing operational efficiencies it offers for their bottom line, the cryptocurrencies market will strengthen. Already Visa’s CEO announced the company is considering adopting cryptocurrency assets, and we can in a very short space of time expect to see the rest of the market follow.
As cryptocurrencies move from their current position of being a valuable commodity to being a payment instrument it will grow in maturity towards being accepted universally.
Still, in its early adoption phase, cryptocurrency offers a sensational technology that still sees prices fluctuate considerably due to immaturity, market exchange security, manipulation, market sentiments based on fear and uncertainty, and prices that see extreme shifts sometimes without explanations.
The positive uptake on this is that it creates an environment ripe for opportunity.
With the financial or fiat economies seen to be unstable around the globe with many predicting its eventual collapse, Bitcoin may benefit from the potential collapse of traditional economies and some say it makes sense to diversify some funds into Bitcoin now. This is because the more unstable traditional economies become, so Bitcoin may strengthen.
With market sentiment being low, this may be the time for speculators to be bold!
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