Cryptocurrency volatility: Dance with economic cycle

Those who cannot remember the past are condemned to repeat it.

We all have heard this saying one way or another. But the truth is no matter we remember it or not, history keeps repeating itself.

Therefore, I’d like to modify the quote as follows: Those who cannot learn from the past are condemned to be left behind.

Traditional market: decadal rolling

How often do we see massive economic crises?

Let’s take a minute to count (despite human-being’s forgetfulness of hurt), and we might have found it to be more often than we thought over the past four decades.

In 1978, triggered by Iranian domestic political turbulence, the war between the world’s two major oil exporters, Iran and Iraq, delivered a severe impact across the region. Economically, the globe had suffered from steep drop in oil output, which fueled the price soar and accordingly led to a wide-spread recession in the western economies.

In 1988, the sequela of the infamous Black Monday extended and finally coerced us into a worldwide recession. No one wants to retrospect October 19th 1987, when the global stock market was dragged down by Dow Jones Industrial Average, with most notably the Hong Kong stock market recorded a 45.8% monthly crash.

History unsurprisingly repeated itself between 1997 and 1998, except the crisis burst in Asia and infected the whole world this time.

Then, it was the 2008 sub-prime crisis, which I believe most of us recall vividly.

In year 2018, although without visible crisis in the traditional financial market, the non-negligible slow-down of China’s economy growth, the overwhelming concerns on the world’s second largest economy’s domestic debt issue, the US-China trade war, the looming end of European QE. None of these problems is trifle.

Decadal, and destructive.

Crypto world: faster but still cyclical

What about the cryptocurrency space?

To figure this out, we need to trace back to the origin — Bitcoin, which is (so far) the backbone of the blockchain industry, in terms of not just crypto market-cap but also the faith.

It’s not too difficult to connect the dots.

In 2012, Bitcoin experienced the first Halving — the 50 percent reduction in block rewards.

In 2013, we saw the price of Bitcoin rocketed, the market enjoyed a red-hot summer.

In 2014, cryto-ers stepped into autumn, a bit chilly but not yet freezing. Many recorded book losses, but still got cash to burn.

When time came to year 2015, some were feeling desperately cold, especially those who ran out of cash and still stuck in debt.

A new round of the seasons re-started in 2016, when Bitcoin’s block rewards halved for the second time.

Then we saw the insanely bullish market in year 2017. We called it blazing hot summer.

But it didn’t last as long as we would wish, then enter autumn again in 2018, only except this time it got colder, and it’s worsening.

Bitcoin price went all way down to just over $3000 from the historical-high of over $19000 over the past 12 months. And I doubt any one would be strongly convinced that this is the bottom.

Next year could be tougher.

You see, a technology-dependent world could neither dodge the historical necessity, rather, it might roll with the cycle even faster.

Bullish 2017: before and after

Taking a closer look at year 2017, mania spread around. By categorizing the phenomena into three major aspects, we would see:

Technology. As mentioned above, I believe we are in an area with very high technology barrier. If we consider Bitcoin to be the first-generation blockchain technology, Ethereum, as the second-generation blockchain tech, boomed in 2017 with a large number of projects building on the chain and raised a considerable amount of money. Similarly, we saw EOS delivered a solid performance this year.

Additionally, the space also saw massive talents inflow — with financial and technology background — and growing online blockchain-related training courses last year.

Prior to that, insiders didn’t want to come out, while outsiders didn’t dare to break in. The former wouldn’t want to let go the chance of becoming the instant millionaire, while the latter couldn’t see through the veil of secrecy.

I mean, how many non-techies would understand the industry lingoes such as Distributed Ledger Technology in the first place?

Ecosystem. We hear this word everywhere, from healthcare VCs to electric car enthusiasts. It actually is no mystery than value chain, which matters of course, as one industry won’t run smoothly unless every value point interlock well.

Given that blockchain is relatively young and definitely immature, not until 2017 did we see value points mushroom — exchange, wallet, media, community, legal and financial service, rating, you name it. And it’s still diversifying.

Capital market. Definitely crazily red-hot in 2017.

In the primary market, very few projects failed in fundraising between second half of 2017 and first half of 2018. As most of the financings were denominated in crypto — ETH and BTC typically — the valuation climbed fast one after another, thanks to the soared price.

Take Telegram as an example, its market-cap as the ICO closing topped $1.7billion. Insane.

The secondary market is no less entertaining. Both the price and number of listing tokens rocketed, lifting the market-cap of the entire cryptocurrency space to over $800billion on January 7th 2018. And guess what, three-digit multiples of returns on token were not extraordinary, because there were four-digit ones!

Then the bubble started to burst, or at least shrink. Now the crypto market-cap is teetering at $100billion, with 90% of the value wiped out by the slump. Most crypto-ers, including me, are in the wait-and-see mood, for technology breakthrough, regulatory update and new instruments.

There is pain, also gain

No running away from the cycle doesn’t mean there is nothing to do but biting the nails.

Quoting Alibaba’s Jack Ma: Today is hard, tomorrow gets worse, while the day after tomorrow will be beautiful. But the reality is that only a minority can get over tomorrow night.

KuCoin is trying to be the minority. We figure, to stand the cold winter night, we need to keep evolving.

What we have been doing in the slow market?

For starter, KuCoin has been upgrading the trading platform, V2.0. The new platform will have a couple types of new orders: stop order, iceberg order, hidden order, FOK (Fill or Kill), IOC (Immediate or Cancel) and GTT (Good till Time).

We are also optimizing our matching engine to support as many as 100,000 TPS.

Another upgrade will be for APIs. There will be a new WebSocket API, including full level 1 market data, level 2 market data and level 3 market data.

We will also have a new Rest API, which will be more stable, efficient and secure.

Some other features on the new platform will be that new users can register via phone number. Also, for security purposes, you will be able to add your phone number to your account. Once added, you will receive an SMS anytime a deposit or withdrawal occurs.

Apart from technology enhancement, the exchange is also exploring various ways in terms of operation.

A few weeks ago, our partnership with OTC platform GUMO went live, with which users can execute fiat-crypto deals easily. Elsewhere, the exchange has teamed up with payment entity Simplex, via which users could purchase BTC and a few other mainstream coins with their credit cards.

We also pay a lot attention on local community management, Vietnam, Turkey, Russia and Spain are our major focuses now. Through KuCoin ambassador program, additionally, we expect to bring more individual influencers, institutions, media, peer exchanges, wallet projects and other participants into our ecosystem.

Compliance is another pain points the exchange is seeking resolution, making moves in several markets including Malta and Estonia.

Indeed, none of these moves seem to be profitable soon, but what if if’s long-term horizon? After all, IDG, Matrix and NGC would never cast their $20million in a valueless company’s Series-A round.

While investors believe in KuCoin, the exchange also has faith in blockchain. Consider the bearish market a sudden thunder, don’t just listen and be terrified by the loud clap, look further, there is the road blazed by the lightning.

Well, a bumpy way ahead is much better than no way out, isn’t it?