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Crypto Road Signs: In Conflict

//Crypto Road Signs: In Conflict

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Prices of major cryptocurrencies continue to fall even amid good stock market news and very solid macro indicators.  So, what gives? These days technical analyst are making all the right calls pointing out the ugly downward sloping chart patterns and failed rallies that have formed over the last few months.

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When looking at the chart, keep in mind that there are human emotions driving prices.  It is important to remember that the bulk of global trading is composed of trend followers. In plain english we are talking a group that notoriously buys heavily in rising markets and sells just as heavily all the way down.  There is little in current behavior patterns that pays attention to fundamental value.

Fading Fundamental Interest

The fact that investors are closing their eyes and selling was clearly illustrated in a recent post at Bitcoin.com. Sighting Google Trends and Insights there is evidence that searches for words like Bitcoin, Ethereum, Ripple and cryptocurrency have fallen as much as 80% from peak fourth quarter 2017 levels.  This closely corresponds with the price action across the broad spectrum of currencies.

This simply confirms the pattern of trend following behavior; when the direction of asset prices changes from positive, investors bury their heads.

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A Few Fundamental Indicators To Ponder

The very fact that you are reading this article and taking the time to sort things out, immediately separates you from the crowd of trend followers.  So here are just a few fundamental indicators to ponder. Will any of these restore the luster to crypto overnight? Probably not but over time, fundamentals always win.  So here are a couple of thoughts.

New Money Is Coming

There is lots of media chatter about the billions being raised by hedge funds.  Bravo, this means new investors coming into the crypto market for the first time accompanied by professional managers that spend lots of dough on analysis that pay attention to fundamental factors.

If Things Are So Bad Why Are ICOs Doing So Well

If you’ve followed the Initial Coin Offerings over the last year, this is an area that has been thoroughly trashed.  ICOs have been called out as “cash grabs” and criticized by tech experts for being “pre product” in other words nothing more than a “White Paper” and a couple of employees.  There have been cases of outright scams that have caught the attention of the media and earned damaging headlines.

For all this, ICO’s raised approximately $3.7 billion in high risk capital in 2017.  Since the start of the crypto price correction last December, ICOs have raised over more than $3.0 billion a 50%+ increase over prior periods.  This is a clear sign of new capital coming into crypto.

Crypto Conferences:  A Measure Of Interest

Woody Allen, the actor, playwright and comedian once remarked, “Those who can’t do, teach and those who can’t teach — teach Gym.”

Those pearls of wisdom could be updated and applied to the latest form of teaching- the crypto conference.  On the website BNT, I counted no fewer than 43 crypto summits, conferences, workshops in the month of March alone. There aren’t that many days in March. And the seats for these conferences are being filled. There is such a thirst for information on blockchains, smart contracts, ICO, regulation. Trend investors may still be feeling the pinch from the crypto price correction but interest from actual industry members has never been higher.

Speed And Security: Enter PayPal

One of the good things about all of these gatherings is the focus on real world issues. Lately there has been lots of attention on scalability.  Both Bitcoin (The Lightning Network) and Ethereum (The Raiden Network) have their answers to scalability. Yes, but both propose off blockchain transactions and on top of that the crypto community is uncertain when either network will be ready for prime time.  Slow speeds and shaky security concerns are legitimate concerns. Now there is a new twist coming from PayPal.

Trade reports point to a PayPal patent application recently filed for a virtual (cryptocurrency) transaction system designed to address two major issues: speed and security.  Theoretically this could include creating their own payment channel, wallet and crypto exchange.

PayPal’s reach is one of the things that makes their patent application doubly interesting.  The company serves an audience of over 200 million according to the research firm DMR. The company has an impeccable reputation for security, reliability and customer service.

This is both an important measure of fundamental demand for crypto but a big vote for mainstream adoption.

So if you have been patient and read this article to this point I think you will agree that for the moment the crypto road signs point in different directions: prices falling and fundamentals improving.  In the long run fundamental forces almost always win out.

2018-03-11T14:05:58+00:00March 11th, 2018|Categories: Crypto News|

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