Can Certainty and Credibility Boost Recovery of the Crypto Market in Q2?
After a highly speculative year, 2018 started on a low note for the cryptocurrency market. The market experienced sharp drops in the value of more than 1400 coins or tokens listed on the coin market.
By the end of March, the market had lost more than 48% of its value, having dropped from a market capitalization of $612 billion at the beginning of the year to $261 billion at end of the first quarter. As the year progresses, what is really needed to facilitate recovery of the cryptocurrency market?
To a large extent, the drop experienced in the first quarter was catalyzed by uncertainty in the market. As the year began, countries, such as South Korea, banned anonymous trading and China announced a complete ban of crypto-trading.
Consequently, the Securities and Exchange Commission in the US subpoenaed at least 80 companies that were running initial coin offerings in a bid to ensure consumer protection and adherence to laws governing securities in the country.
These regulatory crackdowns may have triggered a sell-off in the crypto-marked resulting to a drop in the value of cryptocurrencies. Though volatility is a major characteristic of cryptocurrencies, securing the market is necessary to facilitate market recovery according to Denis Farnosov, founder and CEO of AlfaToken.
"There is need to reduce security concerns about cryptocurrency exchanges in order to protect investments. The market cap will recover over time but volatility is the nature of cryptocurrencies," Farnosov notes.
Developing regulations to guide operations within the crypto-market is necessary and according to Isaac Nakash, the CMO at Fry Egg, this needs to be a priority.
He says, "Regulations on crypto should come sooner rather than later, this way people can feel comfortable getting involved."
Moving into the second quarter, there is a feeling that all players in the cryptocurrency market have a role to play in boosting performance. On one hand, governments need to prepare and enforce regulations for the cryptocurrency market.
On the other hand, companies operating within the industry should implement ICO projects as proposed and be accountable to investors to boost credibility. According to Antonio Sainz, the co-founder and CEO of Inclusivity, there is an urgent need to do away ICO scams that are currently in the market.
He says, "The crypto community must win credibility within the financial market. It is necessary, on one hand, to eliminate all current ICO scams and on the other hand, for ICOs that have collected sufficient funds to make correct use of them and to show results and progress.”
While agreeing with these sentiments, Nakash also feels the credibility of cryptocurrencies would improve if institutional investors begin getting into the market.
He says, "The crypto market also needs more institutional investments to legitimize its value opportunity. Most importantly, there needs to be a community cleanup of scam ICO’s and coins."
A lot of investor education on what the crypto-market entails and how it can possibly change the world needs to happen if the market is to recover lost ground.
Nakash says, "In order to recover its losses in the last quarter, the crypto market will require that the average Joe gets a better understanding of the cryptocurrency space and how it can improve our world."
Before putting money in ICOs, investors need to know what they are getting into and establish a way of differentiating genuine ICOs from scams. They need to understand the risks associated with such investments and how the cryptocurrency market works. This will enable them to avoid investing in ICOs that are fraudulent.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.