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Not much favours cryptocurrencies. Not even the stars can help

30 Nov 2018 16:11|Bartosz Grejner

"Bitcoin price rebounded from the bottom by about 10%, yet it does not necessarily mean the end of the downward trend. The information flowing into the market is not positive," writes Bartosz Grejner, Conotoxia Analyst.

Latest falls in the cryptocurrency market led many of them to over a year-long price low. Five days ago, the value of bitcoin dropped to the lowest level in 14 months, about 3.7 thousand USD. Though later the rebound led to a 20% increase, at the end of the week, the price went back to around 4,000 USD.

A potentially bad sign for the cryptocurrency market is the exit from the multi-month price consolidation area. The previous two months were relatively calm for bitcoin and the entire market. Currently, however, the cryptocurrency quotations are again characterised by high volatility.

The market bent under the burden of, among others, regulatory spectrum, hacker attacks. The unsuccessful attempts to introduce bitcoin-based ETFs to trading on the US exchange also damaged the market. The same problem persists - the absence of positive information that could boost the market. Is there any information that could turn out to be beneficial? The focus is on regulations. Financial institutions will not increase their exposure to cryptocurrencies until the market is substantially regulated.

Tracking two Iranian citizens

Recent information is not necessarily helpful in improving sentiment, at least not at a time when the cryptocurrency market is under such great pressure. On Wednesday, the Office of Foreign Assets Control in the USA published for the first time addresses (unique strings of digits and characters) which were assigned to two people living in Iran. This is about bitcoin transactions. They are intended to be anonymous, but they are not private (the register of all transactions is public).

The US Office did not specify how it managed to link these addresses with the two Iranian citizens. However, it is clear that they carried out nearly 7,000 transactions worth millions of dollars, and a large proportion of the bitcoins being processed came from more than 200 ransomware hacking attacks (using the SamSam virus).

From a longer-term perspective, the actions of the authorities which have ceased such practices are positive. However, in the short term, when we are dealing with a significant drop in bitcoin and an increased level of fluctuations and emotions, this type of information may further reduce the demand for it. This negatively affects the entire market, considering that bitcoin alone accounts for slightly more than 50% of its value.

Stars also suffer

It becomes even more severe when the US SEC agency informs about the penalties that the famous boxer Floyd Mayweather and music producer DJ Khaled have to pay for illegal promotion of an ICO, public offering in the cryptocurrency world. They agreed to pay a 600,000 and 150,000 USD penalty respectively for ICO's exposures mainly in their social media accounts, where they have millions of subscribers. At the same time, while promoting the ICO, they did not publish information that issuers paid them each time for this type of promotion. The decisions will most likely reduce the enthusiasm of other prominent figures, who may also have considered supporting ICOs. This, in turn, may translate into less interest in digital issuance and the likelihood of price drops.

A small light at the end of the tunnel may be the intentions of the heads of the US exchange Nasdaq and Intercontinental Exchange Inc., the owner of the New York Stock Exchange (NYSE), who intend to introduce bitcoin-based futures contracts, in the case of Nasdaq, this is anonymous information obtained by Bloomberg. In the second case, the news is already official, and the first quotation is due to take place on January 24th.

This spot of light does not transform into full sunlight for a good reason. Similar contracts were also introduced in December last year by other exchanges in the USA: CME and Cboe (both from Chicago). It coincided with rapid price increases of the cryptocurrencies. However, shortly afterwards a gradual decline began. The current situation on the market is diametrically different. Then, the contracts were introduced in a strong upward trend, and now we can observe drops. Therefore, we should not expect contracts to have a similar effect as last year. Initial interest, however, may slightly increase the demand for bitcoin, which under favourable circumstances may have a positive impact on the price of the world's largest cryptocurrency and indirectly also on others.

30 Nov 2018 16:11|Bartosz Grejner

See also:

30 Nov 2018 14:15

Awaiting for G20 (Daily analysis 30.11.2018)

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Weaker dollar supports zloty (Afternoon analysis 29.11.2018)

29 Nov 2018 13:37

Dollar incurs losses (Daily analysis 29.11.2018)

28 Nov 2018 16:01

Dollar still strong (Afternoon analysis 28.11.2018)

28 Nov 2018 13:28

The uncertain outcome of G20 (Daily analysis 28.11.2018)

27 Nov 2018 15:31

Zloty in a favourable situation (afternoon analysis 27.11.2018)

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