Now smaller market cap crypto projects could soon be facing liquidity issues, preventing investors from selling out of their positions. The cryptocurrency market is fairly illiquid as is, and these steep declines do not help, should many investors choose to leave the market and close their positions.
Looking back in history, Q2 is often met with more optimism and bullish sentiment in comparison to Q1. Even more so now that we have many things to look forward to including Bitcoin ETF’s, and most notably, the Coinbase Index Fund that will give investors exposure to all digital assets. Exchanges such as QUOINEX, play an important role by using a bank-grade security system to protect data and assets.
Also, nations such as China seem to be moving in the right direction when it comes to regulation. China has stated that it will soon move in and begin to regulate cryptocurrency as opposed to an outright ban of the digital assets. Moreover, China now has a new blockchain fund with $1.6 billion, something which we have not seen before because 30 percent of the fund is backed by the Hangzhou city government.
With new investment products soon to hit the market, as well as nations around the world legitimatizing cryptocurrency with the talk of crypto taxes and regulations, it is safe to say that further adoption may be closer than we think. In addition to the availability of investment products, we also have strong fundamental news to look forward to.
Scalability is a major issue in the cryptocurrency space, and we are seeing solutions in regard to scalability becoming more mature as they prepare to hit the market going into Q2 of 2018. Many are running on TestNets and will soon be deployed to MainNets in the coming months. This will surely shed positive light on the space and solve arguably the largest problem affecting cryptocurrency right now – scalability.
With scalability solutions launching for Bitcoin and other crypto protocols in the near future, more participants will be attracted into the crypto space. This is due to the fact that transaction times will be reduced in addition to the reduction of fees per transaction. This was a large complaint at the height of the bull market, that it was very expensive to send Bitcoin from one wallet to another, discouraging the use for commerce and trade between individuals. With the Bitcoin Lightning Network, we can look forward to faster transaction times and significantly reduced fees, making it easier and more cost-
effective. Schnorr Signatures will also be looking to replace Bitcoins’ existing signature method by combining signature data together. This will clear up tons of space in the blockchain which will aid in solving the transaction backlog as well as the high transaction fees.
Proof Is In The Pudding
Even more bullish sentiment comes with the fact that many people are losing trust in fiat currency. Places such as Venezuela are going through currency crisis with the United States not exempt from the idea. Many in the United States are catching on to the monumental federal deficits that put the value of the Dollar in jeopardy. Perhaps people may look to a digital store of value such as Bitcoin to act as a hedge against fiat currency alongside commodities such as gold and silver.
From a price point of view, looking back in history, we tend to see more positive bullish action in Q2 leading into Q3. Between April and June of 2016, we saw Bitcoin going on a bull run, gaining over 80% to just shy of $800. The same type of price action can be seen again from early April leading into mid-June of 2017, when Bitcoin went on another bull run, this time gaining just over 170%, reaching another all-time high just shy of $3,000.
Past performance is no guarantee of future results, but perhaps Bitcoin price action may follow its historic trend and pull us out of our current bear market. Currently, technicals are not in favor of bulls with a clear downtrend being shown in Bitcoin. Volume is also very poor on every attempt for bullish action and seems to only give more liquidity for short sellers to capitalize on a hurting crypto market. Bitcoin has also seen what is known as a “death cross” when the 50-day moving average crosses below the 200-day moving average. Many traders view this as a very bearish sign with others believing that the bearish moves have already been priced in, in anticipation for such an event.
Even though many positives are on the horizon in the cryptocurrency space, I still feel as if the current bear market is not over just yet. From a technical standpoint many Altcoins have yet to form accumulation patterns and may be dragged down even further should Bitcoin fall to its next support around $6,000.