THE STATE OF THE CRYPTO MARKETS TODAY

So far 2018 has been a volatile year for investors in Cryptocurrency. The year started with most major types of Crypto’s being valued at all-time highs after an unprecedented rise in prices throughout 2017.

This optimism was promptly followed by a serious bout of pessimism with markets entering a major sell off only weeks into the New Year. In the past number of weeks there has been a recovery of sorts with prices slowly rising until stabilising recently.

The market is now treading water at its current levels, but this may simply be a case of the calm before the storm.

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The calm before the storm

The volatility of any financial market is dependent on the composition of its participants. Crypto markets remain primarily composed of investors who trade for gain; there are a very limited number of buyers who trade driven by what their business needs for day to day transaction processing.

The nature of these investors fundamentally changed in the last quarter of 2017 with a huge number of new investors entering the market driven by the apparent spectacular potential gains on offer. These investors were in it for the short term and expected to get rich quick.

At the first sign of volatility or a slow down at the start of 2018, they deserted the market leading to the major price falls seen.

This reduced the market to those investors who were in it for the long term either by choice or by need, as they are sitting on substantial financial losses.

In the past number of weeks, driven by what some would consider low prices based on recent highs, new money has again flowed into the market which has driven a moderate recovery.

So at present, there is an air of stability, long term investors who are reluctant to sell and investors who are comfortable with volatility have bought in. This stable investor make-up of the market has led to far less volatility than recent experience.

Where this will lead is almost inevitable. This stability will lend credibility to those who want to present these markets as stable and maturing. This will allow promoters attract more volatile money back into the market again as prices rise we will probably see a second episode of the of the turmoil seen at the start of the year.

Whats really going on

In reality, despite the calm, the Crypto markets have very little driving them. The optimism of last year seems not to have been warranted at all. Adoption for productive uses is at best minimal. Whilst the platforms and infrastructure to support their wider use saw investment last year, this has largely dried up.

In order for things to drive forward in a sustainable and productive way some of the hopes which arose last year need to materialise.

A major new piece of infrastructure needs to operate solely using a Crypto in some form, a developing market needs to see one as a way of overcoming infrastructural limitations and the underlying code needs to be adapted by many to make transactions much faster and scalable.

The biggest developments to watch out for are no longer price related, they are all adoption related.  Developments in this area are now key for the long term future of this project lest it grow to be considered nothing more than a volatile novelty.

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