Most of the thousands of altcoins on the market have fallen as much as 99% from their all-time high prices, have reached extremely oversold conditions, and are at the absolute bottom of the barrel sentiment-wise. However, according to one crypto analyst, altcoins are on the verge of breaking out of long-term downtrend resistance and an “altseason” may be around the corner.
Analyst: Altcoin Crypto Market Cap at Pivotal Resistance Point
Altcoins such as Ethereum and XRP have had a much further fall from their all-time high prices than their eldest sibling, Bitcoin. Bitcoin has fallen roughly 85% from its previous peak back in December 2017, while number 2 and number 3 cryptocurrencies Ethereum and XRP respectively have each fallen 90% from their high points.
The added sell pressure has caused sentiment around altcoins to be at extreme lows, but the tides may be turning soon, if critical resistance can be broken.
According to a chart shared by prominent crypto analyst GalaxyBTC, the altcoin market cap – an aggregate of the total crypto market cap minus BTC – is at pivotal overhead resistance that has served as such all the way since January of 2018.
The early signs of an “altseason” are already showing, with Ethereum, EOS, and BCH all posting 15-25% gains on the day, while Bitcoin rose just 8.5% by comparison. The rest of the altcoin market is a sea of green today, as a clear sentiment change is occurring in the crypto space.
Bitcoin Has Long to Go Before Downtrend is Broken, BTC Dominance to Suffer
GalaxyBTC also shared some thoughts around a pattern commonly found in cryptocurrency trading. The analyst discovered that oftentimes following a build-up of BTC dominance – a metric that weighs Bitcoin’s market cap against the rest of the crypto market – it breaks down, causing a spike in altcoin dominance also referred to as an “altseason.”
1. Build up $BTC domination 2. Breakdown 3. Altseason 4. Rinse and repeat.
Furthermore, looks like the weaker the dominance uptrend the longer the altseason and so far this one is the weakest.
The reason for this could be normal ebb and flow of capital to and from Bitcoin into altcoins, faith being restored by crypto market participants, or quite possibly due to the fact that most altcoins have broken through downtrend resistance, while Bitcoin hasn’t.
Finally, we need to acknowledge that the bear market has not been broken yet.
Here’s the resistance line we’ve been tracking. As you can see, we’re not even close to breaking it just yet. pic.twitter.com/tWX58rshnh
A chart shared by Senior Market Analyst for eToro Mati Greenspan shows that Bitcoin still has a long way to go before it brushes up against the downtrend resistance. The resistance dates back to January of 2018, after the first ever crypto’s parabolic advance was broken, kicking off the bear market that continues even today.
Altcoins and Bitcoin are closely correlated, so a strong rally in the altcoin market could help restore confidence in Bitcoin again, and drag Bitcoin up through resistance along with the rest of the cryptosphere.
Visa and Mastercard are planning to increase transaction fees for US merchants who accept card payments, Reutersreports. The hikes, which come into effect in April 2019, are likely to further damage already the fragile relationship between payment providers and merchants.
According to sources, the increases will firstly affect interchange fees, which merchants pay their banks when accepting a card transaction. Fees that the banks pay to Visa and Mastercard for processing payments will also increase, says the report.
A spokesperson for Visa confirmed that fees would rise in April, but only for banks, not merchants. However, banks are not known for their benevolence, or for reducing profits by absorbing costs. So they are likely to pass on these fee increases to the merchants.
Similarly, merchants exist to make a profit, so will have to weigh up whether to pass these costs on to the consumer.
Bottom line – We’re all getting stung.
In The Name of Security
The card companies tend to justify their fees by claiming security measures must be enhanced to prevent fraud and theft. They also point out that merchants receive more sales if they accept card payments.
But in Q4 2018, Visa’s net income rose to $2.85 billion, an increase of 33% on results for Q4 the previous year. Similarly, Mastercards Q4 profits last year climbed to $1.9 billion, also a 33% jump on the $1.43 billion in Q4 2017.
Perhaps the fees need to be raised to cover the $6.2 billion payout the two companies faced after losing a US anti-trust case? Although that money had supposedly already been set aside, the merchants are gearing up for round two.
Or perhaps US fees need to be increased to offset reduced profits (not losses, never losses) in Europe, due to anti-trust investigations there?
Bottom line – Visa and Mastercard are not to be trusted.
The People Are Revolting
Or at least the people should be revolting. We are all being overcharged thanks to the hegemony of the big two payment processors.
But there are alternatives… and they scare the crap out of Visa and Mastercard. That’s why, despite a widespread denial in financial circles that Bitcoin is anything like cash, they both charge cash-advance fees for bitcoin purchases.
And now that Visa and Mastercard are throwing their weight into political arguments, we should be demanding that our favored merchants accept cryptocurrency payments. After all, if accepting card payments increase overall sales then accepting bitcoin opens up a whole new market.
And all efforts are going towards reducing fees for bitcoin and crypto transactions.
Bottom line – We would all be better off using bitcoin.
Can cryptocurrencies capitalize on Visa and Mastercard raising their fees? Share your thoughts below!
Bitcoinist spoke with Shelly Hod Moyal, Founding Partner and Co-CEO of iAngels, on why the ICO market popped and where the cryptocurrency industry is headed next.
A Hunter College and Kellogg MBA graduate, Shelly is a recognized expert in the areas of Fintech and Blockchain, and is a sought-after expert at international conferences about Israeli tech investing. She serves as a board member of multiple iAngels portfolio companies.
Bitcoinist: Why did the ICO market experience such hype in 2017?
Shelly Moyal: This is a loaded question and there are a few things to unpack. First, most emerging technologies experience hype cycles in which excitement gets ahead of the technology but there are a few things that make the ICO boom and bust unique.
The two most important differentiators were, 1) the participation of retail investors, and 2) liquidity of the assets (i.e. the ability trade these assets on exchanges). Most hype cycles go unnoticed as they are experienced primarily by venture capitalists and due to illiquidity, implode gradually over several years vs. several months as VCs more easily hide behind book values when market pricing information I unavailable.
Before I go into the hype which was driven by a lot of BS and speculation I think it’s important to give the idealistic background that drives the interest in the technology.
There is a growing disenchantment of consumers with traditional institutions which are centrally controlled and therefore vulnerable to mismanagement, exploitation, failure and moral hazard.
Bitcoin has shown the world that it is possible for a group of strangers to reach consensus without anyone controlling the system. This unique feature “programmable trust” has sparked the interest of several academics and entrepreneurs who imagined the possibility of creating numerous applications based on this feature.
The most popular project set out to build an infrastructure for such applications is Ethereum. Similar to Bitcoin, the infrastructure is an open source protocol and it is possible to buy into the project by buying its access token Ether. Bitcoin and Ethereum are both early examples where technology meets capital in the sense that you can buy a token both as a user and as an investor, virtually enabling anyone to invest without restrictions.
The way protocols (like Ethereum and Bitcoin) incentivize adoption is through their access token which has speculative value. As the network grows, the token appreciates in value.
During 2017, the generated wealth of the early Bitcoin and Ethereum investors was readily allocated into additional startups (mostly ICOs) set out to build the ecosystem in pursuit of further capital gains. In turn, hundreds of thousands of people worldwide witnessed how early investors in Bitcoin and Ethereum realized incredible 1,000x+ profits and wanted a piece of it as well.
Entrepreneurs started creating protocols and adopted the ICO crowdfunding vehicle to raise millions of dollars of nondilutive capital for their “token” startups. With the lack of regulatory guidance and oversight around these tokens as well as the lack of institutional investors balancing price levels around fundamentals, prices were getting way ahead of themselves resulting in a large boom and subsequent bust.
Why did it subsequently crash in 2018? Regulatory clampdown? Lower Bitcoin price? Or a combination of factors?
The “crash” was the result of 1) the disillusionment of investors, and 2) the regulatory clampdown.
Most of the investment activity was driven by speculation and price movements were influenced by illiquidity and at times, market manipulation. As these projects were all early-stage startups that have not yet created value (a product and network) it was impossible to justify multi-billion dollar valuations.
The fact that many projects also turned out to be fraudulent didn’t help, and the high demand for these assets gradually evaporated over the course of 2018.
Furthermore, there is no coherent business model for these token investments. In other words, it was (and still is) unclear how value will be captured by the early investors of these networks. Most of the projects today do not have a token model which effectively aligns incentives between users and investors. There is an inverse relationship between velocity and network value.
Meaning that the more hands the currency changes, the lower the valuation of the network because if all demand is met by supply there is less scarcity. So a successful product could still result in little value captured by token holders. Many projects today are experimenting with different token models like mint and burn, governance, work tokens, TCRs etc expected to drive appreciation in the token but these are still unproven.
Furthermore, as regulators, specifically the SEC, made it clear that most token sales are considered security offerings (according to the Howey test and Hinman’s guidance) and started investigating projects that conducted an ICO, more and more entrepreneurs decided not to pursue the ICO path as they realized their tokens would be considered uncompliant securities.
What kind of lessons were learned during the past year?
There are no shortcuts to building a startup even if it’s decentralized. It takes time and for that reason, venture capital cannot be entirely replaced. The idea of startups trading in a liquid market is very nice theoretically but there is no reason for any startup that doesn’t have anything aside from a team and an idea to trade at something much more than zero.
Even today when startups raise money at a certain valuation, it doesn’t mean that the next day someone would be willing to buy the startup at that price. This pricing is just a mechanism for building partnerships between entrepreneurs and investors, not an indication of real fundamental value.
This brings me to another lesson regarding the importance of governance. The lack of self-governance of these startups requires regulation and corporate governance to protect investors and consumers until these networks can truly and fairly govern themselves.
During the period between 2017 and 2018, the ability of entrepreneurs to raise money with no strings attached led to massive abuse, which damaged the industry in many ways.
Ironically, this created a bad perception of the movement largely set out to build a better world with financial inclusion and more aligned businesses built on the values of fairness, transparency, and decentralization.
Why do you believe that the STO can replace the ICO?
We don’t believe STOs will replace all ICOs. STO is a broader category. Indeed, decentralized/utility token projects can take advantage of this route too but broadly speaking, STOs are simply an evolution of capital markets allowing us to tokenize any kind of asset. STOs will play an important role in the future economy as they provide infrastructure for trade and reduce inefficiencies in the current financial markets through disintermediation.
STOs are exclusively based on their regulatory compliance and vetting. How can this crowdfunding model attract the same amount of people that the relatively permissionless ICO model did?
It can not and should not. STOs, by definition, are subject to national securities laws and are thus treated like issuances of traditional securities such as equities and bonds. As a result, the investor universe is restricted and those that choose to market to the general public will be required to comply with heavy and expensive regulation similar to those required by companies wishing to raise an IPO.
STOs will thus more likely follow the trends and cycles of the financial instruments underlying tokens rather than those experienced in the recent ICO bubble.
How does your company iAngels help these projects to manage their capital?
We help them just like we help our other startups across various areas. Investing in startups is a long term partnership and we strive to give our entrepreneurs any support they need whether it’s in business development, fundraising, marketing, finance and/or strategy.
What projects have you invested in recently?
One interesting project is Spacemesh, which tries to create more fairness through a consensus mechanism: Proof-of-spacetime (PoST). Within PoST, storage space is utilized as proof for the verifier (as opposed to computational power in Proof-of-Work).
While nothing stops someone from buying huge amounts of storage space to increase their influence on the consensus, these actors face diseconomies of scale and such behavior is thus not economical. As a result, unused storage space on home computers can contribute to the consensus and if the technology works, the degree of decentralization can be high with low energy costs.
Like you mentioned, most of these projects experiment with new token models, building apps on unproven blockchains. Wouldn’t it makes sense to harness the biggest network effect, i.e. Bitcoin rather than try to build their base layer digital value networks from scratch?
Yes, definitely. Bitcoin and Ethereum have indeed managed to build strong networks over the years with large developer communities, and there is a lot of room to innovate on the layers above these blockchains. And indeed, over the last year, we have already seen several projects build promising applications on these blockchains, especially Ethereum, for example, Maker Dao and its stablecoin Dai.
However, as there are different types of applications, we believe there is no one size fits all blockchain and so there is room for other innovative and novel blockchains (e.g. faster, more secure, more decentralized) that can also emerge as leaders for certain applications.
What is the biggest barrier to cryptocurrency adoption right now?
We believe that the main barriers are technology and regulation. In terms of technology, the stack is not developed enough to build scalable and user-friendly decentralized applications (dApps). And currently, only tech-savvy people interact with them.
Interaction with a dApp, for example, requires you to download the Metamask browser extension, to create a wallet and to fund it with Ether bought through an exchange or broker. This is a lengthy process before you can even interact with a dApp. In order to achieve adoption, the blockchain must operate in a way that is just as seamless as the applications we use today and this will take some time.
We are still at a point in which entrepreneurs need to create breakthroughs at the first infrastructure levels of the technology.
It will take time until crypto will feel like Visa or Mastercard, which are much higher up in the technology stack. Think of the internet before broadband and mobile, much less useful.
In terms of regulation, it is important for entrepreneurs and users to have clarity about the regulatory treatment of these assets, which they don’t have today. As a result, participants in the technology are exposed to potential legal and regulatory proceedings. This veil of uncertainty deters most risk-averse people and institutions from adopting the technology.
What are the opportunities in the industry?
Today the market has changed and what was possible in 2017 isn’t possible today, so what we are left with is actually what might be the biggest opportunity for the industry today.
Talented entrepreneurs and groups are sitting on piles of cash with a lot of time to work and focus on shipping rather than the next VC round. This is a significant advantage given that in VC, entrepreneurs typically raise money for 18 months and if they don’t hit their milestones they’re often out of business.
By removing this “timing risk,” theoretically, a team of talented people has a higher chance of succeeding. If even a few blockchain projects emerge as value adding from this wave, it will be a great win for the industry.
What do you think about Shelly’s view on digital token regulations? Share your thoughts below!
Matt Hougan of Bitwise Asset Management believes the sooner the cryptocurrency purge happens, the better it will be for the fledgling industry. Hougan says he expects the coming reckoning to wipe away the many worthless coins currently in existence, much like during the dot-com era.
95 Percent of Cryptos Are ‘Useless’
Appearing on the Masters in Business podcast hosted by Barry Ritholtz, the Bitwise head of global research offered up striking parallels between the present day cryptocurrency industry and the dot-com era of the late ‘90s and early 2000s.
I think those parallels are accurate. It – I think it is the next dotcom. But remember, the dotcom bubble created pets.com but it also created Amazon.
Commenting on the future of the industry, Hougan declared:
…[T]here are 2,000 cryptocurrencies out there, 95 percent of them are useless and will die a painful death. The sooner that happens, the better.
However, Hougan doesn’t expect this purge to sound the death knell on the burgeoning industry. Instead, the Bitwise executive expects the thinning of the herd to initiate the emergence of useful cryptocurrencies.
There are numerous commentators in the industry today who agree with the idea that many cryptocurrencies are indeed worthless. This belief has led to the popularization of the term “shitcoin” [sic]; referring to cryptos with little or no economic merit.
Hougan isn’t also the first to comment on the parallels between cryptocurrencies and the early days of the internet. If history does repeat itself in the form of a crypto-crash, it stands to reason that the surviving projects will be to the industry what Amazon, Google, etc. are to the internet.
Cryptocurrency Value Chain Still Years From Full Realization
During the interview, Hougan also highlighted the unique selling point of cryptocurrencies that exist at the core of decentralized technology; the ability to execute transactions without requiring an intermediary party. According to Hougan, real-world applications of this ability will have significant implications on the “cost of trust.”
However, the Bitwise executive conceded that it was still early days with a lot more work still required before cryptocurrencies can reach their full potential. According to Hougan, the current UI for virtual currencies leave a lot to be desired especially from an ease-of-use standpoint.
If the purge does occur, which cryptocurrencies do you predict will come out the other side? Let us know your thoughts in the comments below.
A company with legal problems; a mysterious death; missing customer funds. The QuadrigaCX story could have come straight from the pen of a hack Hollywood writer. Well now, the internet’s faithful crypto-investigators, claim to have found evidence of transactions initiated from the supposedly ‘lost’ cold wallets. The Litecoin wallets, at least.
Let’s Start With a Quick Recap
QuadrigaCX is Canada’s largest cryptocurrency exchange, although it has just filed for creditor protection, following months of transaction delays. Customers are naturally concerned about their funds, as all assets are temporarily frozen… supposedly.
Problems for the company started in January 2018, when the Canadian Imperial Bank of Commerce (CIBC) froze CA$26 million in assets. According to the bank, CA$67 million worth of transactions wrongly ended up in the payment processor (Costodian Inc)’s personal account. This legal action dragged on until 3rd December 2018, when a judge ordered the release of the funds.
December then saw a string of promises from Quadriga that the money was coming, following confirmation on Christmas Day that they had received the funds… followed by more promises, then the announcement on 14th Jan 2019, that their CEO, Gerald Cotten, had died in India, on 9th Dec 2018.
Please see our statement regarding the sudden passing of our @QuadrigaCoinEx founder and CEO, Gerry Cotten. A visionary leader who transformed the lives of those around him, he will be greatly missed. https://t.co/5rvGZ2BfLV
Unfortunately, explained Quadriga, and Cotten’s wife, Jennifer Robertson, the $250 million worth of cryptocurrency of customer funds is stored in cold wallets are not recoverable as only her dead husband knew the private keys.
Naturally, the tinfoil-hat brigade didn’t believe this and even suggested that Mr Cotten was, perhaps, not entirely dead. It is claimed that he died of complications surrounding Crohn’s disease while working at an orphanage.
Even Jesse Powell of Kraken questioned the legitimacy of the story and offered to help the police with any inquiries.
Dead Men Don’t Move Funds
When the internet gets to work, the internet gets to work. Several sleuths posted ‘evidence’ of discrepancies in the official line.
On Reddit, someone claimed to have found Quadriga’s Litecoin cold wallet addresses, and that funds were being moved out. Commenters were eager to see this as proof the death was just an exit-scam until somebody pointed out that, it was at least equally likely that the person who had taken control of the keys simply didn’t want to share the funds.
A separate investigation into the company’s bitcoin holdings suggested that there were no cold wallet reserves. It identified several discrepancies in the official story and said that QuadrigaCX does not appear to have lost control of their bitcoin holdings.
The investigation also claimed to prove that Quadriga ran a fractional reserve. To which the internet replied… Meh, probably. But some of your assumptions are questionable.
It’s likely to be some time before we know anything for sure.
Do you think the CEO isn’t dead after all? Share your thoughts below!