Cryptomarkets: from heaven to hell to heaven 🧐

Bitcoin is down more than 80% since peaking above 19500$ in December 2017. Plenty of other cryptocurrencies have suffered far worse. Is it time to make a bargain before the next bubble?

I promise there is a great chart further down somewhere, it's all you need.

As expected, 2018 was a rough year for crypto markets, after a majestic rise over the preceding two years. Many investors were so enthusiastic at the top of the market that even the founder of Ethereum had to warn his followers “Have we really created solutions worth half a trillion dollars already?” The answer was obviously no.

Personally, I sold my crypto and went to Hawaii.

Hard times

Since then it seems the critics have been proven right. The total market capitalization has been dramatically reduced. After the most recent drop back in December, one Bitcoin reached a low of 3200$ - a great deal a year and a half ago. Public interest is dead, media is negative, twitter is all silent. Fresh creations of so-called crypto wallets are at record lows, despite becoming ever more user-friendly. Big institutional investors remain on the sidelines.

Just as 2017 was an obvious bubble, this is beginning to look like an obvious bottom.

A number of technologies crucial for cryptocurrencies to reach their potential are being deployed fast, but not overnight. The implementation of the lightning network is making Bitcoin transactions immediate and practically free. New algorithms like proof of stake, basically a different way to agree on ownership, demand far less computing power. They’re just not ready for prime time.

Crypto spring is coming

But markets are maturing by the day. Many of the least serious and unrealistic projects (aka scams) flooding the euphoric market in 2017 have collapsed or vanished, while more solid investment objects have crystallized and solidified their positions. Leaks from Samsung and Sony show they are both planning to integrate crypto wallets in their next flagship phones, Apple is probably not far behind.

Perhaps most importantly: the biggest players are launching a platform for digital assets, Goldman Sachs is opening a desk for trading cryptocurrencies, and JPMorgan just launched their own coin for remittances, while the first traditional markets for investing in stocks using cryptocurrencies are opening this year.

Just as 2017 was an obvious bubble, this is beginning to look like an obvious bottom. It may seem as though crypto spring is coming.

If history repeats itself, Bitcoin may cost a quarter of a million dollars in the second half of 2021.

A quarter of a million dollars

Looking at the price action it certainly seems Bitcoin found a bottom for the moment, but in such a volatile market we need a big picture to find clear trends. Especially if we are concerned about investing in other cryptocurrencies, its important to remember that Bitcoin’s success remains decisive for the market sentiment.

Let's compare the current situation with what happened after the previous bubble in 2013.

If history repeats itself for the third time, Bitcoin has a truly bright future ahead and may cost a quarter of a million dollars in the second half of 2021. This remains valid even if the price should drop another $1.5k first. There are good reasons to believe Bitcoin is already dramatically oversold in the market, but since the trading volume is still declining, it would seem lower prices are incoming.

The longer the price remains stable before any final drop, the more confident we can be in this bottom, and any drop would be limited. If we keep cool and accumulate as the market turns this year, we are primed to trade with minor risk and exceptional potential for reward.

We are primed to trade with minor risk and exceptional potential for reward.

This piece is mostly about when to trade, not what to trade. Bitcoin is used as a synonym for the crypto market not as a recommendation, but as a recognition.

Bitcoin will remain the gold standard in the crypto world and as much focus as there is on value in dollars, it is value in Bitcoin that is the true measure inside the growing crypto economy. No other cryptocurrency has the same number of users and locations, solid developer community and deep culture to build on. So we cannot escape Bitcoin’s fate.

And Bitcoin doesn’t seem quite ready. Not yet, but soon.

The author owns a number of cryptocurrencies, including those mentioned in the article. This article is not financial advice, please make your own analysis before considering an investment.

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