Remember the good ol’ days when bitcoin’s all-time highs were the hot topic on the holiday table? Over the past year, cryptocurrencies have come such a long way… down.
As of this writing, bitcoin is down over 70% while XRP and ETH are down more than 80%. Bitcoin Cash fared much worse with a 93.27% decline in value, most of which was shed during its hard fork hullabaloo in the latter part of the year. Ouch!
Here’s a snapshot of bitcoin’s run this 2018. Talk about droppin’ it like it’s hot:
Some of the factors that are being blamed for the declines are:
Regulation and taxation
The year was off to a rough start as most of the focus in January and February was on regulation, particularly in the top markets of China and South Korea.
While South Korea banned anonymous crypto trading then, India and Pakistan took a harder stance on these digital assets, announcing an all-out ban in April. The central bank of Iran also deemed it illegal for banks to transact using cryptocurrencies.
In the United States, a special task force probing price manipulation tactics in cryptocurrencies was also created. Rumors that government authorities in different countries are looking into taxing crypto transactions also contributed to market unease.
ICOs, in particular, were the target of increased scrutiny by regulators as a number of fraudulent tokens deceived unsuspecting investors. The crackdown and mass liquidation took its toll mostly on ether since the ERC20 token was used to build majority of these ICOs.
Although the industry has taken great strides in terms of beefing up security, some exchanges still weren’t immune to the usual slew of hacking incidents and theft.
Early in the year, Japanese crypto exchange Coincheck lost roughly $500 million worth of NEM and took almost the entire year to recover from the incident. In June, South Korean exchange Coinrail was hacked, then followed by an even larger-scale attack on Bithumb.
In August, Israel-based decentralized exchange Bancor announced that it suffered a security breach and that an estimated $13 million in holdings were affected.
Market watchers were extra sensitive to these types of updates that even short outages spurred speculations of yet another hack.
Bitcoin ETF delay
There was a lot of excitement about bitcoin ETFs finally being introduced and approved by the SEC as this would likely usher in a ton of volumes and activity.
Soon enough, market watchers seem to have lost interest and may have even given up hope that bitcoin ETFs would be available soon. It didn’t help that the SEC rejected nine applications in one fell swoop, which hurt the chances of the pending ones.
Bitcoin Cash mining war
Of course who could forget the infamous mining war that ensued as Bitcoin Cash split into factions Bitcoin SV and Bitcoin ABC? Heck, all that uncertainty is still being blamed for the bloodbath that ensued in the last two months of the year!
Crypto haterade also kicked into high gear and the increased coverage on naysayers contributed to the prevailing FUD mood then.
Throughout the year, bitcoin took some bashing from the likes of Nobel Prize-winning economist Paul Krugman, JPMorgan CEO Jaime Dimon, former IMF chief economist Kenneth Rogoff, FOMC member Neel Kashkari, former Fed Chairperson Janet Yellen, and Nobel Prize-winning economist Robert Shiller. Phew!
Still, some believe that this entire year was just one big correction for the cryptocurrency market. Here’s how it looks since 2012:
Here are some developments and expectations that could still spur a big rebound for the industry:
Fiscal and economic troubles in the likes of Turkey and Venezuela allowed digital assets to demonstrate their potential as an alternative means of payment and store of value.
One major development that sprung from these crises is the world’s first state-issued cryptocurrency in Venezuela called petro. While it may be too early to tell if this can indeed function properly enough to replace fiat currency, its use for commercial transactions within the country and other new features that could be introduced are worth keeping tabs on.
High hopes for institutional moolah flowing in had investors seeing dollar signs for the most part of the year, although some of this enthusiasm faded when crypto-based securities struggled to get regulatory approval or saw its launch dates pushed back.
Still, there is a lot of anticipation for Fidelity’s institutional crypto trading platform that would likely draw funds from big players like financial institutions and hotshot hedge funds. This added to the crypto buzz on the likes of BlackRock, Cohen Private Ventures, and HSBC around the middle of the year.
ICE Bakkt bitcoin futures are also worth watching, even as some studies revealed that the launch of CME bitcoin futures in late 2017 spurred the sharp tumble in prices then.
The so-called flippening originally referred to some other digital asset (initially expected to be ethereum) overtaking bitcoin, but there were a few notable switches in ranking among the top 10 cryptocurrencies for the year.
In particular, XRP overtaking ETH to snag the top two spot was a pretty huge deal as Ripple made consistent developments in its xCurrent and xRapid platforms. Other changes in standings also briefly involved Bitcoin Cash versus Stellar and EOS.
Any other crypto themes to watch out for this coming year?