BTC & co at the crossroads
Updated
Today I was contemplating the charts on different time scales trying to figure out what lies ahead of the crypto-realm. So I decided to lay down a few points, just to have them on the record for later analysis once the outcome will become known.
From a peak of 812 Billion dollars on the 7th of January, in just four weeks the entire crypto-world lost 50% in value being down to 414 Billion on the 2nd of February. While me personally I don`t find this "market cap" indicator too relevant in terms of what the true value of each token / coin is (or of the entire crypto-realm for that matter), it`s dynamic does have small clues about what is going on. For example, it is worth noting that BTC dominance is down to 34% and ETH is around 21%, with BCH sitting way behind at 5%. For comparison, in February last year we were looking at BTC having 85%, ETH 5% and all the other alts counting for 10%. So, quite a change of the crypto-world in one year in terms of what is more valuable.
While this entire "crash" as some doomsday preachers are calling it might seem a dead song of the cryptos, in my opinion is nothing more than the end of the birth stage and the beginning of the growth stage. We are already 9 years into the blockchain technology, since the 3rd of January 2009 when Bitcoin was "invented" and boy did it teach us some. We saw the limitations of this wonder-kid technology that shook the financial paradigms of central banking and money printing, we saw the amount of greed that could be triggered at a very short notice in large masses of people, we saw scams, hacks, thefts and anything else the human mind can conceive in order to get rich fast. We saw the amount of energy the initial technology needs to function and we soon realize there is simply not enough. What we also saw was a growing interest for improvement, for identifying the bottlenecks and for trying to eliminate them. However the most important aspect noticed was the scarcity of the most valuable resource needed, the human developers able to tackle the tremendously complicated codes of the technology.
Now that all those technical aspects are known, the possible range of applications this technology presents is also known, we are at the point when regulators will step in in order to curb the greed of the masses and to reward the big boys playing by the rules. Going beyond the usual FUD and fake news always present in the mainstream media, there are already forces in motion to set the stage for the next phase. For example, exchanges already started to talk about limiting or even suppressing their retail operations focusing only on institutional clients, coin / token "compliance reviews" are being conducted, tax authorities are quickly drawing up taxation schemes, governments and regulatory bodies are conducting joint meetings and increase collaboration in drafting specific legislation.
The limit not to be crossed seems to be the fiat / national currencies / legal tenders.
This leads to the next point, the types of coins / tokens available on the markets. In my opinion we have the payment oriented coins, the value storage coins and the eco-system bricks type of coins. As examples - XRP, BTC and ETH respectively. Of course we still have the scam coins, but we don`t count them in here as they will be coming and going so fast in the future that won`t make any difference. Also, there will be a small percentage of coins / tokens focusing on privacy and anonymity, with the most obvious use case being tax evasion (like today the off-shore paradises) with an unknown future / market cap.
From a peak of 812 Billion dollars on the 7th of January, in just four weeks the entire crypto-world lost 50% in value being down to 414 Billion on the 2nd of February. While me personally I don`t find this "market cap" indicator too relevant in terms of what the true value of each token / coin is (or of the entire crypto-realm for that matter), it`s dynamic does have small clues about what is going on. For example, it is worth noting that BTC dominance is down to 34% and ETH is around 21%, with BCH sitting way behind at 5%. For comparison, in February last year we were looking at BTC having 85%, ETH 5% and all the other alts counting for 10%. So, quite a change of the crypto-world in one year in terms of what is more valuable.
While this entire "crash" as some doomsday preachers are calling it might seem a dead song of the cryptos, in my opinion is nothing more than the end of the birth stage and the beginning of the growth stage. We are already 9 years into the blockchain technology, since the 3rd of January 2009 when Bitcoin was "invented" and boy did it teach us some. We saw the limitations of this wonder-kid technology that shook the financial paradigms of central banking and money printing, we saw the amount of greed that could be triggered at a very short notice in large masses of people, we saw scams, hacks, thefts and anything else the human mind can conceive in order to get rich fast. We saw the amount of energy the initial technology needs to function and we soon realize there is simply not enough. What we also saw was a growing interest for improvement, for identifying the bottlenecks and for trying to eliminate them. However the most important aspect noticed was the scarcity of the most valuable resource needed, the human developers able to tackle the tremendously complicated codes of the technology.
Now that all those technical aspects are known, the possible range of applications this technology presents is also known, we are at the point when regulators will step in in order to curb the greed of the masses and to reward the big boys playing by the rules. Going beyond the usual FUD and fake news always present in the mainstream media, there are already forces in motion to set the stage for the next phase. For example, exchanges already started to talk about limiting or even suppressing their retail operations focusing only on institutional clients, coin / token "compliance reviews" are being conducted, tax authorities are quickly drawing up taxation schemes, governments and regulatory bodies are conducting joint meetings and increase collaboration in drafting specific legislation.
The limit not to be crossed seems to be the fiat / national currencies / legal tenders.
This leads to the next point, the types of coins / tokens available on the markets. In my opinion we have the payment oriented coins, the value storage coins and the eco-system bricks type of coins. As examples - XRP, BTC and ETH respectively. Of course we still have the scam coins, but we don`t count them in here as they will be coming and going so fast in the future that won`t make any difference. Also, there will be a small percentage of coins / tokens focusing on privacy and anonymity, with the most obvious use case being tax evasion (like today the off-shore paradises) with an unknown future / market cap.
Note
Now back to the opening part of the idea, it seems the market is at a point of its evolution where it starts to favor the eco-system / building blocks type of coins and to steer away (at least from the growth point of view) from the others. This makes perfect sense based on all the above fundamentals and the fact that politically the technology is accepted while the replacement of the legal tenders is not.Even at the TA level, when we look at the BTC weekly chart we can see the price arrived at the crossroads. It has to decide where to go next. All the momentum indicators are weakening, the RSI is at 50, the MACD just had a death cross and the candles are exactly at the trend intersection, around the 0.618 Fib level of the last bull run. All those point to the middle, saying "BTC is looking for its identity". As outlined above, the entire crypto-world is shifting, evolving, maturing so basically the answer to this "identity" question will be offered by the real use-cases of the technology. The arrival of the ETFs and the derivatives marked the entry point of the "big boys" into the financial part of the market and there the key is stability. We might see price fluctuations up and down, just enough to make it attractive but I doubt we will ever see the huge swings we were witnessing until now. Instead, the focus will be on accumulation and diversification, in promoting the coins / tokens with real use cases values while having some sort of general indicator like the BTC price (at least for a little longer, until the entire market matures completely)
Note
I had to split the text into several parts as there is a character limit so thank you for your patience and for taking the time to read it. Any comment, idea, though is greatly appreciated. Thank youNote
Just a bit off-topic but very interesting nevertheless. On Friday, Dow Jones closed 665.75 points down from the previous closing. How about that perfect number? Not to mention the big "jump" down just just a few days before. Is the stock market ready for a crash? Hmmmm ....Note
One more thing that was bugging me for the past day or so ... overnight, most of the major US banks decided to "protect" their retail customers by declining any crypto-purchases by credit card. So ... let me see if I get this right ... the BTC price and along with it the entire crypto-realm lost more than 50% of the market cap in about 4 weeks leaving a lot of small investors with big losses (most likely they panic sold so now they are left with a major credit debt towards the banks), the stock market and the treasury bonds market are about to go down big time and the good banks are closing the door on the face of those retail customers for the only hope they could have had to hedge the fiat losses ... the rebound of the crypto-market. Sounds about right :)Note
Oh boy what a day ! DJI almost on the oversold area on the daily and the BTC hit another interesting number ... $6600 . Precisely, right? A, meanwhile some UK banks decided to shut the door on the credit card purchases as well and China censors the access to all crypto-exchanges in the world. Looking forward for tomorrow :)
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.