An October report published by OneAlpha suggests that Bitcoin has gained strength following the 2018 correction. Moreover, based on their findings, they posit that the bear market has had a “cleansing effect” on the crypto marlet, as the bust drove out speculators and “[lowered] valuations to a more sensible level.”
Based in Israel, OneAlpha is a division of the First Digital Assets Group, which describes itself as “the leading digital assets group in Europe.”
The report provides an in-depth look into the state of the blockchain space with a market overview, a look at tech and trends as well as a summary of regulations around the world. Here, we look at some key insights from the report.
And BTC Price Goes Boom!
In 2017, Bitcoin’s price experienced several bursts that saw it peaking at nearly $20,000 in December.
The Bitcoin and cryptocurrency hype reached a whole new level. Newbies started flocking to crypto exchanges like Coinbase, which saw over 100,000 additional users join its digital family, and everyone seemed eager to cash in on the then 9-year-old entity that was sure to make everybody rich.
Unfortunately the hype was short-lived, as starting in January, Bitcoin and several of its crypto-cousins began experiencing swift drops in their prices and values. Bitcoin fell to roughly $11,000 by the end of the month, and was trading at around $9,000 in February.
At the time of writing, the currency has lost roughly 70% of its January value and is trading at around $6,400.
Over the course of 2018, many investors lost funds and considered the crypto space to be something of a sham. Google searches relating to cryptocurrency began to sink, and it appeared that the industry was in something of a dark place.
The Bright Side of the Bear Market
But a light has emerged at the end of the tunnel. Despite the consistent drops in both crypto values and prices, it appears something good has come from all this, and OneAlpha claims that the present bearish conditions are having a “cleansing effect” on the cryptocurrency ecosystem.
In the report, the authors suggest that during 2017, many people entered the market in an extremely immature way, and that the bearish circumstances have given Bitcoin some stability, which could lead to a better, more legitimate market status instead of its present bubble image:
From our perspective, the prolonged bear market provided the sector with much-needed relief, lowering valuations to a more sensible level. Despite the considerable correction, a large portion of the value represents the future potential of the network rather than its current one. The December 2017 and January 2018 boom and bust had a cleansing effect on the ecosystem, removing many of the speculators and leaving mainly real investors, operators and builders in the market. This is what was necessary to move forward and build a successful ecosystem.
Bitcoin’s Not the Best at Everything
In addition, the report states that while Bitcoin remains the best and strongest currency, Ethereum outdoes Bitcoin’s blockchain by a mile.
The authors suggest that the 2nd-largest cryptocurrency by market cap has shown greater influence in many ways on the crypto and blockchain space:
Currently, bitcoin is gaining strength and captures more than half of the total crypto market cap. Ethereum captures 10 percent of the total market cap. There are currently more than 2,000 traded crypto assets and more than 1,000 unique tokens worth around $14 billion. 87 percent of the tokens are Ethereum-based, with NEO and Waves capturing around 2.4 percent each… Of this valuation, it is noticeable that bitcoin captures about 71 percent of all currencies and ether 54 percent of all platforms.
The Prognosis Is Still Good
The report further states that initial coin offerings (ICOs) have been instrumental in getting the public more involved in crypto (despite several being fraudulent or phony), and that institutional investors have become far more involved in regions like the U.S. and China. There has also been a recent surge in blockchain patents.
In conclusion, the document describes the situation surrounding the crypto space as generally positive, regrouping after the great bear market of 2018 and on an upward trajectory:
We are experiencing a phase of sobriety and maturation – a decline in retail investment and a more careful, responsible approach from institutional investors on one hand and regulators around the world on the other. A long bear market might be the ideal climate to let the dust settle and examine, both internally and externally, the true possibilities that lay within the cryptocurrency and blockchain ecosystem. Ultimately, the goal is to take a step further and bridge the gap between consumers, traditional investors and blockchain technology.
To view the full report by OneAlpha, click here.