The End of the Bear? Crypto Currency on the comeback…
First published 2019
(The Hague, 03.06.2019) Coming out of Q1/Q2 of 2019, the crypto currency space is seemingly reigniting the spark it had lost over the bear cycle that began in January 2018. Arguably, this cycle has come to an end, with Bitcoin – ahead of the pack – surging from $ 5,000 to $ 8,600 (at time of writing) in just the matter of several weeks.
It is not the first time that massive price surges create a lively environment in the crypto currency market. In 2017, Ethereum had created a complete crypto currency craze, essentially shooting it into the mainstream. However, those part of it then would also remember the volatility the markets held, and still can hold to this day. As a result of this craze, the Bitcoin price soared from roughly $ 1,000 at the beginning of the year to well over $ 19,000 in last weeks of December 2017. This ride had many ‘experts’ speculate that the currency would eventually reach price ranges of $ 100,000 and more – some even predicting it to reach millions. However, as baseless as those ‘expert’ predictions were then, they are now. Recent developments have shaken up the markets: those that were burnt in the aftermath of the unbelievable 2017 bull run are suddenly back, only to seriously consider if it is worth to purchase yet another ticket for the roller coaster ride.
The goal is to be the guy that makes millions out of investments as small as several thousand dollars. It’s been done before. The temptation is real. Looking into projects such as NEO (Previously: AntShares), only to find that the token which in March of 2017 had cost only $ 0.20 had peaked at a USD value of over $ 180 per token (90,000%) in the middle of January 2018 can easily create what in investing is described as Fear of Missing Out (FOMO). And here exactly lies the danger. Longtime investors dealing with volatile assets know that a big portion of getting it right is the research, both in a fundamental and technical sense. However, those acting on FOMO are often those who overlook this important info in their attempt to get rich quick – often to their own demise.
The Risks of a New Market
The comeback of crypto has naturally also seen the return of scam artists in the space. The very well-known scam Bitconnect, for example, is back for another round of reeping in badly informed people’s money: Bitconnect 2.0 is here to repeat what the original did in 2017: derive trust out of a well-managed Ponzi scheme, initially creating profits for its clients, and even being ranked within the top 10 most lucrative cryptos, only to vanish into thin air overnight and leave real, unknowing people with often up to 6- or 7-digit losses. Some took out loans with unsustainable interest fees, only to jump into the market and profit quickly. It is therefore very important to keep one simple advice in mind: There is no easy way to getting rich. There may be temporary luck involved but this does not necessarily mean that it is a sustainable strategy to long term success. Anyone not doing due diligence WILL lose.
With this in mind, what can be done to prevent a repeat of those 2017 developments? How can the volatility cede to exist, and ‘true’ value of such assets be found? The answer is very simple in theory, however not as easy to put into place in practice: real-world utility. An overwhelming majority of projects only have a flashy roadmap and smart graphics to their name. Therefore, it is important to extract those with an actual real-world utility from the often-large pile of garbage that is out there. Many firms simply hold Initial Coin Offering (ICO) after ICO (or in the current trend Securities Token Offering [STO] after STO). They do not actually have any utility to offer, and mainly run on uninformed individuals getting taken advantage of.
In the end, what should decide value is simply the age-old supply vs. demand debate. In order for the crypto currency market to mature to a stage where it is finally not just a volatile playground for people with too much cash, things must change. Real world adoption of large companies such as Amazon’s Whole Foods are a step in the right direction. Further, the aspect of regulation in the space is an important factor for its maturity level. It is these developments that will hopefully create a market that is mature and more importantly has a purpose to exist beyond gambling & finding an adrenaline high.
This text is surely not intended to be financial advice. Having been loosely involved in the space for well over two years now, that would be foolish to portray. Although the overall feeling, created by a mixture of recent developments, news, upcoming events and some historic data is bullish, the space has shown that all of the former mentioned indicators can often matter little to none if a curve ball enters the playing field. Whether crypto currency will therefore surge in value or continue the pre-Q2 bear time frame is somewhat written in the stars. However, this piece could serve as a reminder not to be swayed too much by greed, FOMO and the often so easily accessible riches.
An Outlook of the Imminent Future
For those wanting to pick the topic of cryptocurrency back up, it is to serve as a reminder to always do your due diligence in research, and furthermore to never invest more than you are willing to lose. There will be tempting tokens and projects along the way. They will describe themselves as revolutionary, game-changing, the ‘new’ Bitcoin. Simply put, all of these claims are often false and are made to reel in those that either do not have the time or the patience to inform themselves adequately about the market – especially with recent waves upon waves of positive developments.
Crypto has a long way to go before it becomes a mature market with real world applications and utility. Some good projects exist. Those, with the right mix of regulation and further development, may be those that truly make a change. However, they are not as plenty in numbers as the community may want to make one believe. Similarly, just because a tech giant may release their own token, it does not automatically mean it will be a success (although they are more likely to fulfil the requirements to do so than the ‘standard’ crypto ICO/STO company with 2 marketing experts, a content developer and a figurehead CEO).
At the end of the day, monetary gains in the cryptocurrency market are temporary. They are never ‘profits’ until the fiat value is in your bank account. The one thing that the volatile market cannot take from you once you have gained it is knowledge. Read, ask questions, try to understand the fundamentals behind a project. This is the way to long-term success in crypto, and in the life of an investor.
With all of the above in mind…
Be mindful.
Be cautious.
Be informed.