While many smart members of the global investor community turned and walked away from cryptocurrencies in the winter of 2018 and 2019, the spring thaw has triggered renewed interest as volumes have exploded and some digital coins have rallied 2oo% or more in only four months.
But in addition to increased investor activity and a strong rally, there are many infrastructure changes implemented during this “inactive” winter that point to a future in digital currencies that will be supported by trusted institutions. The behind the scenes transformation of the crypto-currency market is shocking. Keep watching we will explain.
This long cold and silent winter in the crypto market started in the first week of December 2018 and lasted until the first week of April, with Bitcoin trading in a tight range between $3,500 and $4,500 for much of that period. Interest was so low, that the market was on life-support, the result being 90% of traders and investors disappeared.
But as March and April rolled around, investors started to buy Bitcoin and other digital assets, and it became clear that here was momentum building.
Suddenly the market woke up.
And the rally from the fist week in February from the $3,400 level to the May high of just near $9,000 for Bitcoin was followed by, in the same period Litecoin rallying from near $31 level to $115 with some excited investors calling for a price target of $500 in the next 12 months. Yes, the crazies are back again.
In mid-May 2019, a technical formation called an ascending channel was clear and Bitcoin price accelerated higher from $5,900 to $8,300 with a one week period.
But this aggressive rally was driven by what we call “FOMO” or fear of missing out. You may laugh but the “heard mentality” afflicts even the smartest groups of investors.
There are some who just come to buy Bitcoin, as they do for many assets, simply because they are hearing that friends and competitors are now getting involved. Keep in mind that when Bitcoin doubles in price, many investors do not want to openly tell friends at dinner, “I missed out.”
So the FOMO rule always drags in those who trade by fear.
On this platform we tend to look at charts and volumes – especially when price trades to new highs for the month. Bitcoin looks strong as we check each box on the technical analysis list.
But there are some interesting points that we have made on our platform that we would like to bring up again. First is the so-called 2018 wasted year was actually a great year for crypto and blockchain.
The evidence is there, as so many global institutions such as Citi, Nomura, JP Morgan and others built systems that would support this new ecosystem and some in fact were even testing their finished product. Our point is that global infrastructure was built more quickly than many expected.
The second point is that the highs reached in the past, well they were snuffed out by the weak market that we saw over the past six to twelve months – and it means that lower trading fees are here to stay.
So with a global infrastructure in place and growing, and with smoother and more affordable transactions, the Bitcoin market may have weathered the storm and could see a sustained rally and a legitimate market used by trusted investors in 2020 and beyond.
But we want to emphasize that the market has matured over that past year and despite being forgotten over the winter, 2019 could be a better year for the crypto market. More in the coming weeks.