Why the Crypto Market Crashed So Drastically
Cryptocurrencies have emerged as the most sought-after investments of our age. Everyone wants to get on this gravy train. What’s frightening, however, is that fickle speculators have taken the wheel, while serious investors have taken the backseat. Volatility reigns supreme in this space and stability remains missing in action. This is exactly why this joyride met with the deadly accident in January—a calamity that will go down in history as the great crypto market crash of 2018.
Even though prices have slightly recovered, the hefty losses incurred by impatient investors will probably remain etched in their memories forever.
One concern in the investor community right now is whether prices will ever revert back to their all-time highs. To answer that, it’s fair we first tackle the more pressing question: Why did the crypto market crash in the first place?
I’ve theorized before that the crash was the consequence of a significant inversion in investor opinions. A string of bad news—namely, the rumor of a South Korean crypto ban, the Indian government’s crackdown on exchanges, and the possibility of stringent U.S. regulations—stimulated pessimism in the markets.
I took a calculated position on this crash that a flurry of good news may largely prove sufficient to revive investor spirits. My theory was confirmed on Tuesday after the U.S. Senate hearing on cryptocurrencies concluded on a positive note.
The regulators let up on cryptocurrencies, breathing a new life into the dying markets. Cryptocurrency prices began to recover as the dark clouds dissipated.
Now, this wasn’t the first time cryptocurrencies crashed. Crypto markets have already survived at least two major crashes prior to this one. Cryptocurrencies have nine lives.
At the Yahoo! Finance All Markets Summit earlier this week, Adam White, the vice president of one of the largest cryptocurrency exchanges in the world, Coinbase, reaffirmed the same. He asserted that the cryptocurrency future potential is bright. According to him, cryptocurrencies are here to stay and have “characteristics of all different asset classes.” (Source: “All Markets Summit: Crypto,” Yahoo! Finance, January 7, 2018.)
Back in 2013, we had Treasury come out and say, hey look, digital currencies like Bitcoin are most akin to a currency. In 2014, we saw the IRS, which is another part of Treasury, come out and say digital currencies are actually property. In 2015, we saw the CFTC come out and say digital currencies are a commodity. And now we’re seeing the SEC in some cases saying that certain digital currencies, specifically tokens related to ICOs are going to be looked at as securities.
His comments reiterate that regulators are turning acquiescent toward cryptos. South Korea, the U.S., and India have all finally backed off from a cryptocurrency ban.
At this point, however, it’s worth pointing out that not all cryptocurrencies have a promising future. At the same summit, crypto bull Barry Silbert, the CEO of Digital Currency Group (DCG), warned investors that most cryptos may eventually crash to zero.
A quick heads-up here; DCG is the firm that gave us the biggest Bitcoin fund, Bitcoin Investment Trust (GBTC), and is now launching the Grayscale Digital Large Cap Fund, an investment fund with five holdings—namely Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin.
Here’s what Silbert said at the Summit; “In the long run, I think there’s only going to be one digital gold. I think there’s only going to be one privacy-focused token. I think there’s going to be one main smart-contract platform.” (Source: Ibid.)
His proposition makes absolute sense, which is why we’ll only be reviewing three of the top cryptocurrencies today, which we feel have the potential to survive the test of time.
Bitcoin Price Forecast 2018
Bitcoin remains the bellwether cryptocurrency recognized by all and sundry. Today, governments and global institutions bestow respect on it for blessing the world with blockchain. That fact, per se, should be enough to hush up the skeptics.
Bitcoin is the most widely accepted coin. Roughly 166,000 transactions were conducted in BTC in the past 24 hours alone. It’s also the most liquid cryptocurrency out there. (Source: “Cryptocurrency statistics,” BitInfoCharts, last accessed February 9, 2018.)
The only notable criticism leveled at it is the lack of scalability—a feature that has rendered Bitcoin slow and expensive to use.
But Bitcoiners may soon see a solution to that problem. Take, for instance, the fact that Coinbase is adopting SegWit (shorthand for Segregated Witness) technology in the upcoming weeks. In layman terms, it’s a technology that will speed up transactions and lower fees. Likewise, we have reports that Bitcoin core developers may be adopting the “Lightning Network” (another technology that increases scalability) to speed up its performance.
With these improvements coming to the BTC network, there is no reason for us to not be bullish in our Bitcoin price forecast 2018. We expect Bitcoin prices to rebound sooner than later, as mainstream adoption continues. Our price target of $15,000 for 2018 may seem outlandish, but factor in all the positives in play and you may arrive somewhere close to our estimate.
Ethereum Price Prediction 2018
Ethereum is one cryptocurrency that weathered the market storm better than the rest. I’ve discussed it in greater detail here why Ethereum has an edge over other coins.
Ethereum’s network, built on “smart contracts,” creates demand for ether from within via the decentralized applications (DApps) running these contracts. As the number of these DApps keeps growing, so does organic demand for ether.
More than 1,000 DApps are presently running on Ethereum. On top these, Ethereum’s partnerships with corporate and financial sector heavyweights through the Enterprise Ethereum Alliance (EEA) are additional drivers of growth.
We see massive growth potential for Ethereum in the coming years. Quite frankly, we won’t be surprised if Ethereum eventually takes a lead over Bitcoin because of its apolitical, universally friendly nature. Our Ethereum price prediction 2018 is upbeat with a price target of $1,500. You can follow our daily Ethereum updates here.
Ripple Price Prediction 2018
Ripple’s claim to fame is its partnerships with financial industry giants, most prominently banks. In fact, many have bought into this idea for the very reason that this crypto may ultimately be adopted by mainstream banks. And Ripple is beginning to deliver on that promise.
A number of global partnerships with cross-border money transfer and payment processing companies, announced in the past one month alone, have renewed our faith in Ripple despite its ginormous slump through the crypto market crash 2018.
I view Ripple’s future prospects to be promising and see it reattaining its all-time high value in excess of $3.00 apiece. My fellow analyst at Profit Confidential, Gaurav S. Iyer, is three times more bullish and has set a $10.00 price target for XRP prices in 2018. You can read our daily Ripple news coverage and XRP price analyses here.
Cryptocurrencies cannot be fairly valued with traditional valuation models since they don’t fully resemble any established asset class. Crypto markets are still very young and will take their time to mature. Until then, volatility is expected to remain high. Investors are warned that market sentiments drive prices in this space.
Nonetheless, in the long run, the wild oscillations in prices seem to smooth out. This is why we expect cryptocurrency prices to eventually retrace their steps up north. In hindsight, the crypto market crash 2018 will appear to be a momentary hitch that passed.
So to answer if BTC, ETH, and XRP will stabilize in 2018; I believe they will take their due time, but a reversal in prices is certainly overdue.