3 Things the Crypto-Market Needs to Recover Lost Ground
The cryptomarket has experienced a significant drop starting early this year. According to CoinMarketCap, the price of top five cryptocurrencies by market cap dropped in the first quarter of 2018.
The price of Bitcoin dropped by 52%, Ethereum by 48%, Ripple by 78%, Bitcoin Cash by 73% and Litecoin by 49%. During this period, the total market capitalization of cryptos dropped by nearly 58%, from $612 billion to $261 billion.
“The market, in 2017, boomed in a way that had not been seen before. Some cryptos went up more than 100x in value. This drop in Q1 2018 is a healthy correction to the overall market,” says Liwaa Chehayeb, Chief Business Officer at Darico.
Despite this drop, the cryptomarket is potentially poised to recover sooner than many originally anticipated. However, this recovery will be dependent on the following three factors:
The cryptomarket is still self-regulated, traders or players determine the framework within which to operate. Until today, there is no legal framework governing crypto transactions. This creates numerous security and safety loopholes that scare investors away.
Lack of regulation also leaves investors unprotected and provides room for illegal activities within the crypto ecosystem. This is what prompted global actors such as the U.S. Securities and Exchange Commission (SEC), Japan's Financial Services Agency (FSA) and Chinese regulators to launch regulation initiatives, probes and bans on cryptos.
In the US and Japan, regulators have launched crypto projects probes, even suspended others citing non-compliance with securities law. Just recently, leading tech giants Google, Twitter and Facebook banned crypto-related ads. China has already banned crypto trading and is working towards blocking Chinese investors from accessing foreign crypto investments.
To facilitate cryptocurrency recovery, regulatory frameworks need to be developed to ensure the ecosystem is regulated by specific globally-accepted standards. With countries, such as the U.S., UK, Germany, Japan, South Korea, Finland, France, Argentina, Spain, Israel, Venezuela adopting a bullish attitude towards cryptos, it is expected. Global crypto regulation will increase investor confidence and attract many more across the world.
Denis Farnosov, CEO and founder of AlfaToken says, "Increasing market confidence for new investors is a priority. Potential investors will need to see crypto as a buying opportunity. There is also need to ease concerns about government regulations and fears of financial institutions banning cryptocurrencies."
As regulators formulate these regulations, developers within the cryptocurrency industry should be ready to implement and capitalize on them.
“As international legislatures threaten to end the regulatory "free lunch" many ICO founders have enjoyed, blockchain developers must set out to meet these emerging standards and demonstrate readiness for the post-regulation economy of compliance to ensure legal longevity of the cryptomarket,” notes Piers Mana, co-founder and systems architect at Roux.io.
Cryptocurrency has been termed a bubble due to its ability to decentralize traditional financial ecosystem the same way internet did to communication, business and travel. Efficiency of the entire ecosystem needs improvement if the cryptomarket is to recover. Cryptocurrency developers should make it easier for anyone to invest in or create crypto projects without necessarily having to understand how the technology works.
There are predictions of a single global digital currency in future. This can only be achieved if the technology underlying cryptocurrencies is improved and synchronized to enable its utilization by anyone anywhere, including the underbanked and unbanked populations. By so doing, more investors and companies will support cryptos.
"The world is waking up to the fact that traditional currencies are being manipulated. This will cause a big financial problem. However in the long-run, cryptocurrency being a decentralized medium of exchange would help catapult its value significantly," notes Chehayeb.
Many people across the globe remain unaware of cryptocurrencies yet they can contribute to the recovery of the cryptomarket. There is need to share information about cryptos including cryptocurrency trends, investment opportunities, benefits, potential risks, successful crypto projects amount others.
People need to understand how the industry has transformed from being a buzzword, or bubble a mainstream financial ecosystem. They should be informed why financial institutions, such as banks and other companies, are integrating blockchain technology in their business models.
Content developers should consider unique needs in every market segment and package information based on those needs to convert prospective investors into real crypto investors.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.