Throughout its lifetime, Bitcoin (BTC) has gone through four major corrections/crashes, all of which triggered a drop of more than 80 percent in value. This year, the crypto market declined by more than 69 percent of last 2017’s peak. Other cryptocurrencies like Binance Coin (BNB) and EOS experiences smaller losses.
According to Chainalysis, the Bitcoin market reached maturity throughout the past nine months. “The market seems to have recalibrated after the entry of so many new market participants with different beliefs and expectations than those who held Bitcoin prior to 2017. Neither long-term investors nor new speculators have changed their positions much this summer. This suggests that the market will make a major move, for better or worse, only in response to a fundamental change.”
The Bitcoin market displayed stability since August 6, remaining in the $6,300 to $6,800 resistance level. There are other cryptocurrencies like Ripple and Ethereum that were highly volatile at the time.
Market experts like Shapeshift CEO Erik Voorhees, ex-fund manager and Billionaire Mike Novogratz, venture capitalist Ben Horowitz, and Coinbase CTO Balaji Srinivasan
Erik Voorhees stated his prediction of the crypto market on CNBC’s “Crypto Trader”. “I don’t expect it [the bear market] to end soon, although I do think that the rate of collapse has slowed considerably. Generally in these bubbles, after you go through several months of a downtrend, you hang out in a range for a while […] But I think we are done with a majority of the collapse.”
The market has exemplified signs of what Mike Novogratz call seller fatigue, as investors started to lose interest in selling cryptocurrencies at this low price range. “I think we put in a low yesterday. Retouched the highs of late last year and the point of acceleration that led to the massive rally/bubble. Markets like to retrace to the breakout. We retraced the whole of the bubble.”
Last 2017 the crypto market reached an all-time high at $800 billion, which was largely triggered by a new wave of interest from both retail and individual investors. The demand for cryptocurrencies was so high that some regions like South Korea and Japan came to a point where exchanges could no longer sell to buyers.
Kyle Samani, a general partner at Multicoin Capital, said that once the trusted custodians are in place and the infrastructure built, there will be another wave of new investor interest in cryptocurrency market. “There are many investors where custody is the last barrier. Over the next year, the market will realize that safekeeping is a solved problem. This will release a large capital wave.”
The sentiment was also expressed by Ari Paul, co-founder of hedge fund Block Tower stating, “Custody isn't binary. It's not like Coinbase Custody will launch and suddenly every pension will throw $100 million into BTC. It takes time for custody solutions to gain trustworthiness. But, I think we'll have solid third-party custody by September of this year. That will allow institutional inflows to start accelerating. Once a couple big traditional money managers announce that they're including BTC as ‘digital gold’ in their portfolios, others will follow.”
It’s already September and truthfully we are seeing progress. BitGo and Coinbase are already approved as Bitcoin custodians in the United States. Moreover, major banks Citigroup, Goldman Sachs, and Morgan Stanley are preparing to server customers in the crypto market.
Besides the major American banks, Bakkt, Nasdaq and many other regulated financial institutions in Japan and South Korea have actively developing ways to support the crypto market.
Novogratz predicted that in the upcoming months, institutions will enter the market stating, “It’s also a bull market in institutions building the infrastructure needed for real money investors to start investing in this space […] I think that in three to six months from now, there will be an ‘all clear’ sign for people — big institutions and pension [funds] — to start investing.” He believes that if that happens, the Bitcoin price will likely achieve a 30 percent increase by the end of 2018.
Ben Horowitz, the co-founder of one of the most successful technology-focused venture capital firm Andreessen Horowitz (A16Z), stated that he sees a correlation between the increased developer activity today and that of the internet in the 1990s.
“I think that there is probably more developer activity in crypto than in anything we’ve seen since the internet and the right way to think about it is [that] it’s a new computing platform. Once every decade or two, a new computing platform comes along. The thing that is deceptive about [it] is that when the new platform at the time is generally worse in most ways than the old platform but has some new capabilities,” says Horowitz.
Historically, Bitcoin has proven time and time again to recover to new all-time highs after a major crash/correction. It is highly likely to continue to do so considering increasing interests of retail and individual investors as well as the amount developer activity in the blockchain space.