The crypto markets have been in a rather tumultuous upheaval as of late , with the overall value attributed to cryptocurrencies having their worst quarter performance in recent history. Bitcoin, as per the norm, has been leading the charge when it comes to bullish or bearish sentiment for the market, paving the way for many an altcoin to taper off heavily in value, some losing over 90% of their Fiat value. ICO’s themselves are in a prickly situation as well, with liquidity drying up almost entirely when it comes to finding investors who are willing to buy into their projects, as well as the difficult task many ICO’s have with negotiating ETH pegs at USD rates this low.
Bitcoin has tanked from all time highs of around 20’000 USD all the way to recent lows near 6’000 USD – that’s a steep discount for the premiere cryptocurrency, representing an overall 70% drop in price. Billions of dollars have been wiped from the valuations of the crypto market on the whole, and one can hear the frantic mentionings and hushed whispers in the dark that “the bubble may have popped.” Of course, a more realistic view on things is in order, and so in this article we will take a look at some of the factors that are affecting the Bitcoin price on a more fundamental basis, as well as some future predictions for the markets. Let’s dig into exactly what happened to Bitcoin and crypto markets during Q1.
It’s a well known fact that the majority of crypto traders simply don’t report their earnings to the IRS. That’s not particularly news – the difference this year, however, is the large amount of publicity and news that has been circulating around crypto since the big boom of 2017. In years prior, it might have been much safer simply not to report any kind of earnings, but due to the notoriety that Bitcoin has amassed (as well as the IRS now reporting information on who is actually paying their crypto taxes) it’s a much more delicate situation. According to some experts, US taxpayers on the whole could owe as much as 25 Billion dollars in crypto taxes, and it’s causing quite a scare for many. Due to this new amount of attention on crypto traders (as well as the relative lack of care or knowledge on taxes from the traders’ part) many participants are market dumping their positions simply in order to make good on their taxes. And, if that 25 Billion dollar number is anything close to reality, has proven to be a massive amount of selling pressure on the digital currency.
Technical traders are dumping
Technical traders are also majority bearish – the charts simply aren’t lining up to bullish expectations and upward mobility is being shorted, sold, or otherwise moved down as the market attempts to absorb retail traders trading the short term volatility of the asset. Technical traders worth their salt are almost universally bearish on Bitcoin at the moment, and have been since that cheeky double top we had earlier in the year. This kind of sentiment is likely not to change, as one of the most bearish technical indicators has now appeared on the charts, colloquially termed the “death cross”. This means that momentum has now irrevocably switched to the bearish side as Bitcoin struggles to recover amidst the myriads of technical traders shorting it “to the ground!”
Fortress and Mt Gox
Fortress Investment Group, one of the larger venture companies in the crypto industry, have been reportedly selling massive amounts of Bitcoin in the first quarter of 2018 as they have been liquidating positions in preparation for the change of ownership to the Japanese Softbank Group. It’s unknown whether this selling volume was done through OTC (over the counter) methods or directly sold on the market, but either way, it’s certainly a lot of selling pressure.
So Fortress sold ~$200M worth of bitcoin over the last few months. Mt Gox trustee sold ~$362M worth of bitcoin over the same time period.
So that's ~$562M worth of bitcoin dumped on the market since December between these two alone. I'm surprised price didn't drop lower tbh. https://t.co/jfid2nUktq
— Matt Odell (@matt_odell) April 4, 2018
On top of that, the Mt. Gox trustee was advised to sell some of the 200’000 Bitcoins that are in his posession, and around 40’000 of them were dumped on the market in total, causing massive depression on prices and being a huge factor in the recent downturn of the value of Bitcoin.
With that being most of the bad news for Bitcoin, what about the good? Let’s take a look at some of the things that have been going on behind the scenes while the markets have taken their dive.
Big banks are getting in
It’s confirmed now – Goldman Sachs has bought Poloniex. One of the world’s largest banks (32nd in the world to be exact) has spent roughly half a billion dollars in their acquisition of Poloniex, with plans to bring the exchange up to par and increase their exposure to crypto. Exchanges are one of the best ways to do so, of course, as there is little risk in actually holding crypto assets while simultaneously profitting massively off of daily volumes. It’s also possible (and in my view, likely) that GS will enable Poloniex to do regulated securities trading, thereby making them one of the only exchanges in 2018 to have this kind of functionality. Kudos, GS.
While a bit of a tertiary point, it’s also of note that JP Morgan has continued to build their impressive stash of physical silver. Could this be a play on JP Morgan’s part to avoid the upcoming financial woes that are about to hit Fiat currencies? It’s certainly not bullish for the USD, that’s for sure – the bigger question is how will it affect crypto on the whole. As many relate Bitcoin to digital gold, it could be a play by JPM to safeguard themselves with the physical counterpart (in this case Silver) for what’s coming.
Soros is getting in
It’s also confirmed that George Soros is getting into crypto, with his associates stating that he is “preparing to trade cryptocurrencies”. While that doesn’t state whether he will be going long or short, Soros is notoriously known for shorting and destroying currencies/countries in the process. That being said, it’s of the opinion of this author that Soros will be going short, but not in quite the way many expect.
You see, if you have billions of dollars, you don’t really have any kind of vehicles that have the liquidity able to allow you to enter, much less exit a short position. There is, however, the ability to go long right now, especially with all of this selling pressure and weak hands that are being shaken out from the previous run up last year. In general, I think Soros will be going long Bitcoin to go short Fiat, thereby continuing with his legacy of legendary shorts.
Soros "trading" cryptocurrencies is a very equivocal statement. On one hand, he's known for his devastating shorts that destabilize countries. On the other hand, he is one of the biggest holders of Overstock which is crypto-bullish. Personally I think he is going to go long.
— Roy Blackstone (@StartaleTV) April 7, 2018
OTC volume is sky high
OTC volume for Bitcoin in this range has also been massive, boasting massive increases over previous date ranges with big buys and sells taking place under the table so as not to disturb the overall price movement on Bitcoin. This can be seen as either a bullish or a bearish indicator, but keep in mind that individuals like Soros, the Rothschilds, and Rockefeller are looking to enter positions in these markets.
Lightning is live on mainnet
One of the problems Bitcoin has had historically is being able to scale up to the demands of hundreds of transactions per second and beyond. With the latest release of clients such as the Eclair Lightning Wallet, Bitcoin itself is poised to be able to handle a near infinite amount of transactions as the new Layer 2 solution promises.
World governments look to be lax on crypto
We’ve had several statements made by world governments as well as the SEC regarding cryptocurrencies – it appears to me that most of these bodies are taking a relaxed stance on crypto due to the very real possibility that this boom passes them up. No one wants to be the country that banned crypto when it became the next big thing and lost trillions of dollars to their economy due to silly mistakes. It is because of this that many world government are appearing to be opening up to crypto, and this lack of a hardline regulatory stance is giving participants in the space room to breathe and safety that this isn’t going to be banned in the future.
The verdict – stock up
Given all of the fundamentals we’ve taken a look at, we can paint a pretty clear picture on the price action that we’ve seen in the first quarter of 2018. While all markets are clearly manipulated, crypto and Bitcoin markets are much more transparent due to the nature of wallets and group sentiment on the assets (especially on avenues like Twitter). Expect another big boom in adoption to come in 2018, with all of these great fundamentals lining up, and be sure to have a position when we start taking off in the bullish direction.