Is it Low Tide for the Crypto-Wave?

The price of Bitcoin (BTC) is hovering around the $6,500 per unit mark. The current price is a far cry from the $20,000 zenith achieved in December 2017. That Bitcoin has retreated $13,500 per unit in six months is remarkable, especially for traders with contrarian investments like Bitcoin CFDs going short on the cryptocurrency. While the traditional linear investment paradigm has generated substantial losses in 2018, derivatives traders are benefiting from increased uncertainty, and the lower volumes associated with BTC trading.

Before one ventures into cryptocurrency trading, it’s important to have a precise understanding of what this digital currency is all about. Leading trading brokerage, Wilkins Finance has provided a comprehensive cryptocurrency definition to help newbies and experienced traders understand why crypto is so valuable, despite the volatility and low trading volumes in recent months.

According to this broker, ‘Cryptocurrency is a digital asset in the form of virtual money… between two or more parties over an electronic network. It can be kept as an investment vehicle to be traded in a cryptocurrency CFD exchange. A cryptocurrency CFD exchange is a platform that allows different parties to buy and sell cryptocurrencies CFDs in exchange for other digital assets or fiat money.’

What Determines Crypto Supply & Demand?

Unlike other financial assets which are largely affected by what happens on the stock market, gold prices, oil prices or other economic elements, crypto trading is driven purely by speculative activity. It is not backed by oil or gold, or the actions of central banks. Price and volume are directly correlated with cryptocurrency: when volume decreases, so does price and vice versa. At its current price level, Bitcoin’s market capitalization is hovering around $112.3 billion. There are currently 17,094,787 Bitcoin in circulation, with a maximum circulating supply (according to the logarithmic function) of 21 million Bitcoin.

The top 5 digital currencies include the following:

  1. Bitcoin (BTC) with a price of $6,500 and a market capitalization of $112.3 billion
  2. Ethereum (ETH) with a price of $505 and a market capitalization of $50.5 billion
  3. Ripple (XRP) with a price of $0.55 and a market capitalization of $21.6 billion
  4. Bitcoin Cash (BCH) with a price of $870 and a market capitalization of $15 billion
  5. EOS with a price of $11 and a market capitalization of $9.8 billion

It is interesting to point out that there are 1,629 cryptocurrencies available in the market, with many more in the wings. There are 11,304 crypto markets, with Bitcoin dominating at 39.6% of market capitalization. This means that the remaining 1,628 cryptocurrencies make up 60.4% of the market. The top 5 cryptocurrencies listed above have a combined market capitalization of $209.2 billion. That amounts to 73.6% of the total market capitalization of all cryptocurrencies.

In terms of profitability, more stands to be gained from investing in low price, high growth digital assets rather than Bitcoin, given the high price per unit of this leading cryptocurrency. At its apex, cryptocurrencies had a market capitalization of around $800 billion, and the current market cap is approximately one third of that today.

Why Are Cryptocurrency Prices Depressed?

Based on a variety of reports, notably the University of Texas in Austin study, there may be an element of manipulation of Bitcoin prices in play. While the media has eaten up this research paper, not everybody’s convinced. The most important reason for the current downturn in cryptocurrency prices is regulatory intervention. Countries are either banning cryptocurrency trading outright, limiting their cryptocurrency exchanges to locals, or imposing strict compliance procedures on cryptocurrency trading platforms.

Viewed in totality, this means that the once unregulated, anonymous, and commission-free virtual currency trading arena is now increasingly being squeezed by the tax authorities, governments, and international financial authorities. Bitcoin is expected to trade in the region of $14,000 +/- by the end of the year, a downward revision from the beginning of 2018.

Categories: Currency

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July 5, 2018 Is it Low Tide for the Crypto-Wave?