Crypto: The Clotting Begins

It's time to celebrate. And it's time to buy. Obviously you shouldn't take advice from some stranger on the internet. But normalcy is finally entering the market again. After six months of speculation and FOMO, and an inevitable correction, market capitalization (market cap) has fallen into the projected range of organic growth expected at this point in 2018.

Not very scientific, I know. But then again, nothing over the past six months was very scientific. Psychology, one of those "soft sciences," is the closest answer we have. It was the perfect storm of resources and timing. I'll break it down for you.

1. Fear Of Missing Out

Good ole FOMO. Even though we're supposed to remove emotion from trading, damn it sure is hard when things are growing at double digit percentages on a weekly basis. 

On January 1st, 2017, the market cap was $17.7 billion. On May 1st, 2017 it more than doubled to $37.8 billion. September 1st, 2017? A 4 month period of 450% increase totaling in $172.6 billion. And it explodes from there. Peaking on January 7th, 2018 at $833 billion. In one year, the market cap rocketed up 4,700%. 

That made a lot of people very curious about the fast, easy money all these new Youtubers and Podcasters were talking about. Dozens of "normal, every day people" were now millionaires, and you could be too. The prospect of being involved in life-changing money was hard for many to resist.

2. Mainstream Media Onslaught

The gasoline being tossed on the FOMO fire. Starting in September 2017, you couldn't turn a page in a newspaper or click on a news website without seeing something about cryptocurrency. Suddenly, everyone wanted to know about Bitcoin, and all these "alternative coins." 

Six months earlier, good luck finding more than a few fringe articles and a couple bit segments that you'd see towards the end of a broadcast. However, starting in late 2016 and early 2017, the Youtube community started to grow exponentially and set the foundation for the run up to the fall.

The issue the industry found itself in was now there were hundreds of news outlets covering crypto and they needed their pundits to sound like they know what they were talking about. Sadly, it takes more than a week to learn what the blockchain is, how it works, and what smart contracts are. It takes even longer to have an educated opinion about what the future holds for crypto.

And yet, it didn't slow them down. And it didn't stop the powers in place from injecting a twinge of doubt into every mention. Risk, fad, or our favorite, FUD. Fear, Uncertainty, and Doubt. No one was better at FUDing crypto then the new guys on TV telling millions of viewers about digital currency for the first time. This just in- they didn't do us any favors.

3. The Rise of Coinbase

The kerosine, on the gasoline, on the fire? What's the easiest way to inflate interest into an emerging market? Make it very easy to enter the market. No one made it easier than Coinbase. Just a quick registration, put in your credit card or bank information, and wait a little bit for verification. Voila! Buy as much Bitcoin, Ethereum, and Litecoin you want. 

Every established investor saw their Facebook feeds fill with friends who never before expressed interest in crypto announcing they bought their first bitcoins. Since the price was rocketing towards $10,000/Bitcoin, they were quite happen with their 0.05 BTC. 

Aunts, Uncles, Grandparents. Suddenly, everyone wanted a piece of this digital currency thing. And with such low barriers to entry, the daily volume jumped 500% in a couple short months. It was paradise on the blockchain. Everyone was in the green and we were all having dreams of financial freedom. 

And then, things started to head south, literally...

4. Weak Hands

All those new investors lacked the proper education and training to know how to behave when the market dips. Scared by the potential loses, they exit and tell themselves, "that was fun but I'd rather keep my money safe."

So a dip turns into a drop. Losses become big losses, and more weak hands exit to stop their blockfolio from bleeding any more value. New investors outnumbered the experienced ones 4 to 1 and the blind were leading the blind off of a cliff.

5. Bitcoin Futures

This is still up for debate, but why not include it. Perception is reality after all. The largest threat, in dollars, to price manipulation in cryptocurrency yet. Up until now, whales would come in and out of markets, pushing prices, creating FOMO, and exiting at the top. Something we begrudgingly accepted as a normal day in digital currency.

This was different. New, traditional market money entering crypto. Uncharted territory. And everyone had an opinion about. Most weren't too optimistic about the prospect of traditional money moving into the crypto space in troves. Whether or not it was credible, many believed it, creating its own self-fulfilling prophecy.

6. Scams

Wassa wassa wassa what's up with all these scams?! Lots and lots of scams. Scam ICOs. Exit Scams. Whatever you want to call it, you already know what I'm talking about. All those new investors got swindled out of a lot of money. Pretty simple. Moving on.

7. Western Holidays and Chinese New Year

Bitcoin peaked on December 17th, 2017 at $20,000/bitcoin. Five days later, on December 22nd, it was $12,000. And it never came close again. 

Thanks to the research of others, we've seen what Chinese New Year does to the crypto markets. Four years in a row, the weeks leading up to it, the market would dip. Usually falling somewhere in between late January and mid-February. 

Asian countries are heavily invested in cryptocurrency, more so than other regions in the world. And the presumption was investors were cashing out for fiat to buy presents, go on vacation, etc. Two to three weeks of gift giving and traveling equals very little money for the cryptocurrency market.

8. Regulation and The Threat Of It

The Man is after your digital currency. In some countries, this is very much the case. In others, it is just the constant threat of it. In the U.S., it feels like a new court case is just around the corner that will make trading crypto extremely difficult.

It's an attack on the soul of what cryptocurrency was supposed to be. Decentralized. Self-regulated. Community-lead innovations. The more governments stick their tentacles into the industry, the more purists begin to embed themselves deeper into wanting to keep their version of crypto alive. Don't believe me? Ask them what they think about Ripple.

Starting Again

So here we are. One year later, time has finally caught up. Currently, the market cap sits at $263 billion. Down 68% from the peak two and a half months earlier. That number was last seen on November 24th, 2017, just before the start of the final run up to the peak. 

The market is likely to fall a little more, but the clotting has begun. Most of the weak hands have exited. The ones that have remained are now smarter because of it. Regulation fears have subsided for the moment. Chinese New Year is behind us. And communities are emerging to help protect fellow investors from scams.

Yes, it's time to become optimistic about crypto again. And for all those waiting for the storm to pass, I'd queue up those buy orders. Because everything is on sale.