The past couple of weeks has cryptofans eerily quiet due to the ongoing crypto correction.
The reasons for this bear market are starting to more closely resemble its grandfather, the stock market. In the past couple of weeks we’ve had numerous issues come up in the crypto world. Some of these were foreseen and some were not.
Recent negative news and speculation has caused a knee jerk reaction that has sellers out in full effect.
For example, the Bitcoin Segregated Witness (SegWit) protocol has stirred up much debate. SegWig will allow for faster transactions and increases the maximum space for storage on the blockchain from 1MB to nearly 4MB. It accomplishes this by removing signature information from the blocks and should also increase security.
This isn’t without problems though as it requires 95% approval from the miners. According to segwit.co, 547 of the 1916 blocks needed are complete.
Meanwhile, Bitcoin continues to struggle with scale and its transaction times are getting worse. Its shed almost $400 per coin in the last week.
And that’s the good news. As Bitcoin has remained relatively “stable” (as far as digital currency goes), other coins (altcoins) have been hit far worse.
Just 3 weeks ago everyone was predicting that Ethereum would overtake Bitcoin as having the largest market capitalization of any coin.
Then came all the influx of ICOs (Initial Coin Offerings). Clearly Ethereum wasn’t ready for such an increase in transactions as evidenced by the flash crash last week caused by a combination of ICOs and stop loss triggers. This completely shut down trading on the popular GDAX platform. The results have not been pretty. Ethereum has dropped by 1/3 in value in the last week and now is no danger of overtaking Bitcoin in terms of market cap.
The snowball didn’t stop there as nearly every other altcoin has found themselves in the same bear market. As goes BTC, so go its offspring many times. Litecoin had just surpassed its all time high of just over $50 and it now sits at a humble $36 (too low IMHO). This is quite comparable to negative news that impacts the global stock markets such as Brexit, Greek defaults, or Apple missing on its earnings estimates.
Because of this, we’ve witnessed strong retracements as this bear looks for support. Many previous support levels have already been passed. The worst might not be over yet. In fact, it is likely that it won’t turn around until the next major support level of $1800 or so BTC.
Taking a look at this BTC chart from May until now, we can clearly see a dive down to around $1850 is realistic at this point. Could the market turnaround before then? Of course. I mean look at its meteoric rise just a couple of months ago and you know anything is possible.
At this point I’m sitting tight. I prefer not to buy in now as it would still be like catching falling knives. A big takeaway though is the head and shoulders graphs we are seeing resembles what the stock market often goes through. Stocks have done nicely through the years and high volume crypto trading is just getting started.
When cryptos are a household name and go mainstream is when we will see the explosion in prices. Hang in there, were just getting started!