During the first couple of months of 2019, the price of Bitcoin (BTC) stayed put under the $4,000 mark, thereby solidifying fears that the market was indeed in the midst of a long crypto winter. Not only that, but all through 2018, this space witnessed the simultaneous collapse of around 2,000 cryptocurrencies — which lost around 80% of their combined market cap.
Additionally, it can be seen that over the course of 2018, the general perception of the crypto sector was greatly tarnished thanks to a number of scams and illegal actions that caused investors to lose a whole lot of money (estimated to be worth millions of dollars). As a result, high-profile personalities such as Nouriel Roubini, a Nobel Prize-winning economist, went on record to claim that BTC was the mother of all financial bubbles, thereby causing market panic to spread globally at quite a rapid pace.
Additionally, Ernst & Young also released a market study in early 2018 that showed cybercriminals were able to steal around $1.5 million per month in initial coin offering proceeds, totalling around $400 million of the funds raised.
As a result of these shady developments, a whole host of legitimate projects went underground, waiting for the unwanted noise to settle down — thus causing the crypto market to suffer a great deal. To put things into perspective, Forbes’ “Fintech 50 — 2019,” a list comprising of the world’s most promising tech companies, featured only six blockchain projects. In comparison, 11 crypto companies were included in the 2018 list.
A closer look at the matter
The bull run of 2017 really expanded the global reach of the crypto market, with many novice investors becoming aware of Bitcoin and its potential around that time. However, after the flagship crypto asset hit its all-time high value of nearly $20,000, most analysts and experts started to realize that this positive momentum could not be sustained for much longer and that the market would invariably move to a more bearish mode of operation.
Indeed, such was the case after the first few months of 2018, when BTC’s value tumbled down to $3,300. It was also around this price range that a number of experts thought Bitcoin had found its bottom. Whenever an asset finds its bottom, its overall volatility generally tends to decline. The same was observed for BTC — so much so that during the first half of January 2019, the currency’s native volatility dropped to extremely low levels.
BTC volatility chart, 2017–2020
Another important indicator that seems to suggest that Bitcoin bottomed out between December 2018 and January 2019 is its hash ribbon quotient. In its most basic sense, a hash ribbon can be thought of as a computational tool that combines the hash rate and mining difficulty of Bitcoin in order to identify certain time periods when buying the digital currency is at its most lucrative. In this regard, when the hash ribbon marker sends out a buy signal it often indicates that a local bottom has been formed — which is exactly what happened with BTC at the start of 2019.
“The smart ones bought Bitcoin between $3K and $4K,” Jeroen Van Lange told Cointelegraph. The independent analyst believes the run from $3,000 to $13,000 had a lot to do with market psychology and in particular the fear of missing out:
“This was the ground layer for people who were already invested in 2017 but lost money in the bear market, however, they still had a big belief in Bitcoin.”
Van Lange also outlined other reasons he believes helped push the price of Bitcoin in an upward direction:
- The currency finding support on its 200-week moving average.
- BTC’s volatility touching extremely low levels at the start of 2019.
- The asset dropping by almost 85% from its all-time high value.
Additionally, in relation to the matter, Craig Russo, owner of Peer, a Boston-based startup behind the popular media outlet SludgeFeed, told Cointelegraph that he believes several factors combined to fuel the rise of Bitcoin’s price during the first half of 2019, including “the supply/demand dynamics of the upcoming block reward halving and renewed belief in the inherent value of BTC as a result of major financial institutions and companies entering the space.” Russo also believes that the BTC price has predictably reacted to the market situation:
“It also stands to reason that Bitcoin was recovering from significantly oversold conditions that fueled a short squeeze at a few key levels between $3K and $10K. However, after topping out at around $14K, it has become apparent that BTC is now stuck in a larger range.”
Other key factors that helped thaw the crypto winter of 2018–19
On Oct. 25, 2019, when the price of BTC lay at around $7,500, Chinese President Xi Jinping announced that he will be accelerating his country’s efforts to adopt blockchain in order to promote novel technological innovation across a host of China’s local industries. This was seen as a massive…