Crypto Prices Are Falling — Are People Losing Interest?
We’ve all seen it, we’ve all heard it, crypto prices are falling and the losses are undeniable. Bitcoin whilst once at an all time high a little over $19,000 (£15,000) is now trading at around $6,700 (£5,000).
The total crypto currency market cap has today fallen just below the $300M mark whilst only a month ago (May 2018) the total market cap was a little over $450B and a little over $800B last January. Crypto prices have fallen dramatically losing over 65% of their price in just 6 months… but the question on many people’s minds is “Why?”.
Whilst there is no specific one reason, there are a few different elements that may have and may be contributing to the recent fall in prices. Lets take a look as some of them.
Peoples Sentiment
Back in Q4 of 2017, cryptocurrency was the latest hot topic and everyone was talking about it. Even my Mum messaged me about it and my Mum never watches or listens to the news and is far from a technical mind. But yet somehow, even she had heard of it. A search on Google Trends clearly shows that she wasn’t the only one discovering this ‘new’ thing called crypto.
From around November 2017 till it’s peak around December 2017 - Mid January 2018, cryptocurrency was at it’s peak popularity level of 100, according to the above Google trends chart.
Popular crypto currencies such as Bitcoin and Ethereum were also hot topics during this time.
But worryingly, as quick as the trend emerged, it sharply faded from around February 2018 and currently has a popularity level of around twenty, a fifth of the popularity level.
The question still remains… “Why?”. Still keeping within the people sentiment, it’ likely people began losing some interest due to over inflated expectations. For those within the crypto space, if we had a pound for every time someone asked “When Moon?” or “When lambo” then we’d be very wealthy indeed. Comically, I decided to go a Google trend search for those terms too and what I found was quite interesting.
Curiously, the search term “When Moon” peaked in popularity during roughly the same time as crypto popularity began to decrease. Whilst I don’t have enough solid information, survey data, etc to back up the following statement i’m about to make, It seems to me that at this point people were becoming desperate to make money, likely due to them entering the market too late and buying in at a high price. Whilst the term was popular during the date range where crypto as a term was most popular (Nov 2017-Jan 2018) the term saw its peak popularity before the rise of crypto in October 2017 before peaking during January 2018. So a likely factor in why crypto prices have fallen could be due to lack of people buying more, having not yet made a profit on their initial investment.
“When lambo” as a term seems a little more consistent and even more popular after the drop in prices but my point here is that desperation from the people involved in crypto to make money is high.
Just looking at these trends and also speaking to people I come across it seems to me that people have lost interest as they didn’t get what they thought they would… millions of pounds and a lambo. From those I spoke to, the common factors seems to be they got involved in crypto having no real knowledge of what crypto is and literally would buy whatever their friends told them would be good or crypto with ‘cool names’ with ‘cool ideas’.
But let’s dive deeper into more reasons to answer the question of “Why prices are falling”.
News — Crypto Regulation
During the early years of crypto, there was not much regulation around crypto. Mainly because it was so new, but also because it wasn’t as popular at that time. Around 2013, the only crypto that seemed to be around was Bitcoin and then Litecoin, but then the whole crypto space rapidly inflated as many new crypto currencies came along, each for different reasons though most to make ‘easy’ money.
You can see from the info graphic above that launching new cryptocurrency projects via Initial Coin Offerings and Initial Token Offerings (ICO & ITO) grew a lot more popular during 2017, with the majority launching mid-late 2017. Unfortunately, this new growth and interest in ICO launches mixed with lack of regulation mixed with the new influx of eager yet ignorant average person wanting to invest into crypto, meant many people fell victim to scam projects.
According to an article written in April 2018 by Gareth Jenkinson on CoinTelegraph.com some of the biggest ICO scams were launched in 2017 during the ICO & Crypto boom where projects such as Pincoin and IFan who were run by the same company scammed $660M from investors. Other projects such as the infamous Bitconnect was found to be a ponzi scheme and shut down by two American financial regulators.
The scariest one, as it shows how unsafe the unregulated crypto space can be is Centratech, as it was endorsed by both Floyd Mayweather and DJ Khaled but was later shut down by the US Securities and Exchange Commission (SEC) after they raised around $32M.
But now, regulators are moving in. Whilst I would argue that this is a good thing as it can help protect people from scams and bad actors, the general fear from the crypto industry is that regulation may be too strict, which would restrict innovation and creativity in the crypto industry to the point that it won’t grow and thus likely die. Whilst the fear over regulation is mainly based on rumors and opinions, we do know that regulation is coming into play so this uncertainly will most likely be playing a part in affecting crypto prices.
Thailands Financial Regulator today has adopted new crypto legislation: https://www.worldcoinindex.com/news/thailand-financial-regulator-adopts-new-crypto-legislation
Canada two days ago released an official draft of new crypto regulation: http://www.gazette.gc.ca/rp-pr/p1/2018/2018-06-09/html/reg1-eng.html
And those are to name a few. The point is no one really knows what will be said or set by regulators and how exactly it will effect crypto currency in general as well as individual projects. This uncertainty means more people want to get out before it’s too late, than get in and take the risk.
Decrease in VC Capital and Investment in Crypto
Statistics from CoinDesk show that venture capital firms were investing quite heavily in Blockchain startups from November 2017 giving further evidence to why crypto prices increased during this period of time.
VC funding on a monthly basis, whilst not as high as it was mid 2017, is consistently higher from around November 2017-January 2018 ranging between $100M -over $150M during this period.
Monthly ICO funding also increased exponentially over the space of a few months, reaching a high of over $2.5B. But as can be seen, there has been a significant drop in ICO funding with around $750M being invested as compared to over $1.5B monthly the previous three months before.
It’s likely VC firms and investors alike are waiting to see what regulations are released, though it’s also likely many of these people and companies were burned by the significant price drop or lack of profit from their investments so have just lost interest. My opinion of course, without data and facts it’s difficult to pinpoint exact reasoning.
Supply is more than demand
This may seem trivial, but for those that don’t understand how markets work, I felt it would be a good point to include. The fact is, when many people want to sell and not many people want to buy, a price war begins with each person/company undercutting the price that others are willing to sell at in order to have their order filled.
This means that the price a buyer can get a certain cryptocurrency for, whether it be Bitcoin, Ethereum, Omisego or AgentNotNeeded (ANN) for example, becomes less and less. If one person buys Bitcoin at £5,000 then the price of Bitcoin according to websites such as WorldCoinIndex.com and CoinMarketCap.com is £5,000. That is until it is bought at another price and then that price becomes the reported price.
The reason charts are usually smooth is due to many buyers and many sellers, so the difference in price changes gradually over time, rather than jump from 12p to less than 1p such as what happened recently with AgentNotNeeded (ANN) tokens. The reason for the price fall wasn’t because of anything negative, only for the reason that there is not many people buying due to lack of interest or not having heard about the project, so there are more people selling than buying. This is happening across all crypto currency right now, as not many people are buying in right now, but more people want to sell which drives the prices lower and lower.
Conclusion
So once the demand becomes more than supply, the prices will once again rise. Whilst it’s difficult to predict when that may happen, it seems most likely once regulations have been released and announced, which will attract the big VC firms and investors. This will spur the press to report on it with headlines such as “Crypto now safe!”, “VC firms rush to buy crypto as new regulations make crypto safe”, etc, etc - which in turn, just like in November 2017, will boost public interest once again and the average person will start buying into crypto once again.
Blockchain technology is a truly innovational technology that seems set on becoming the fundamental backbone of future technologies, products and companies, so it’s likelihood in disappearing is slim. Crypto is just a product built on this technology, what it’s future is has yet to be seen, but with the backing of companies and individuals such as George Soros, Tim Draper, Barry Silbert and the Winklevoss Twins, the public will likely be interested in it again, even if they have lost some interest temporarily right now.
Links
ANN tokens website: www.anntokens.com
Follow/Subscribe: www.medium.com/PetrosErotas & www.medium.com/agentnotneeded
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