Is Bitcoin Dead In The Water? What's The Story With The Cryptocurrency Market?

The cryptocurrency market began rather unspectacularly with the release of Bitcoin (BTC) in 2008. The enigmatic Satoshi Nakamoto unveiled the Bitcoin White Paper to rapturous applause from tech aficionados and blockchain enthusiasts. At inception, this digital currency and its peer-to-peer payment system was worth mere fractions of a penny on the dollar. Within a decade, Bitcoin enjoyed a spectacular surge to superstardom, briefly breaking through the critical $20,000 per unit BTC barrier, before plunging spectacularly to its current price range. 

The cryptocurrency market exploded in Q3 and Q4 2017, before being likened to the Tulip Bubble of the 1600s (1636 – 1637). Consider that the price of Bitcoin in January 2017 was hovering around $1,100 per unit, and by December 17, 2017, the price had been recorded at $19,783. At its zenith, the market capitalization of digital currencies quickly reached around $800 billion with an estimated 2,000+ cryptocurrencies operating across 16,000+ markets. Nowadays, Bitcoin is trading at approximately $3,850 per unit (subject to extreme volatility), with an estimated market capitalization of $67.7 billion.

What Has Happened to Bitcoin and Where to Next for Crypto?

Traders and investors are rightfully concerned about the value of their cryptocurrency investments since 2018. Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), EOS and Litecoin (LTC) dominate the top 5 positions in the cryptocurrency market. Combined, they comprise $101 billion of the $130 billion cryptocurrency market capitalization, or 77.7% of the market share. Bitcoin makes up 52% of the total market capitalization at $67.7 billion.  Yet, despite the downturn, significant investments remain in the cryptocurrency market. Many traders – particularly late-stage traders (from 2017/2018) have cashed out, believing that the cryptocurrency market has run its course. 

There are several reasons for the decreased popularity of digital currency investments among the mass populace:

• The hype has faded. 2017 was a bumper year for Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash, Stellar Lumens and dozens of other emerging digital currencies. However, just as quickly as mass interest began, it faded. The hype around digital currency remains in pockets around the world, but the trading volumes necessary to sharply drive up prices has been suppressed.
• Increased pressure is being brought to bear on trading activity by governments, regulatory agencies, and tax authorities around the world. For example, the IRS has notified leading cryptocurrency exchanges that full reporting and disclosure of account holders is mandatory. Crypto profits and losses must be reported on tax return forms.
• Security breaches at multiple exchanges over the years have degraded investor confidence in crypto assets. This serves to drive down demand and with that, prices.

That’s Just One Side of the Bitcoin Pricing Conundrum

It's hard to predict financial instruments with any degree of certainty, or accuracy – particularly with digital currencies. These are perhaps the most volatile of all the financial assets in the world. They are more volatile than Forex (fiat currency) which is backed by reserve banks and predicated on the economic performance of countries around the world. Cryptocurrency is independent of all economic systems and institutions; it is its own entity and was designed to be that way. Cryptocurrency typically functions on blockchain networks, although this is not always the case. The underlying technology behind cryptocurrency is particularly exciting, given all the advances that are taking place for transferring value from one party to another.

A Word from The Bitcoin Aficionados

From a technical perspective, analysts perceive the performance of Bitcoin and digital currency differently. Heading into the final stretch of February 2019, Bitcoin’s price toggled the line between $3700 per unit and $4200 per unit. There are stiff resistance levels with this cryptocurrency. Support and resistance levels are routinely used with financial instruments to gauge their possible price performance. It is a technical analysis tool which attempts to predict prices based on historical price movements. 

In this BTC analysis, cryptocurrency experts evaluate multiple technical indicators to identify turning points, resistance levels, support levels, and trading trends. As you witness, there is some doubt as to the efficacy of trend analysis, given the extreme volatility of this market. The short-term optimism around Bitcoin’s price movements tends to indicate the momentum is shifting in favor of the world's #1 cryptocurrency. Financial modelling is generally supportive of the short-term bullish perspective, although the volatility is enough to thwart any sustained momentum in this area.

The 1-month price chart of Bitcoin indicates a price appreciation from $3579 in late January to the current price of approximately $3800 in late February. Over the past 3 months, the price of Bitcoin has whipsawed wildly, like the rest of the digital currency market, with parity being maintained between the November 27, 2018 price and February 27, 2019 price of approximately $3800. The greatest period of volatility occurred in mid-December 2018 when Bitcoin dropped to $3200 before climbing towards $4255 barely 10 days later. While such dramatic price fluctuations have been rare in 2019, there have been several mini-spikes in recent weeks. 

As Bitcoin goes, so too does the overall cryptocurrency market. 

The multi-million-dollar question on everyone's mind remains unanswered: Which way is Bitcoin going?

Perhaps the most eloquent way of answering this philosophical question (as Bitcoin represents cutting-edge industry, future-tech, and an alternative to established financial systems and enterprise a.k.a. the new economy), one is left with the following realities

• The overall market capitalization of the cryptocurrency market is trending lower and support lines are being tested. On the flipside, it’s possible that a breakout could soon take place.
• There is plenty of lateral movement in the cryptocurrency market. Bitcoin maintains its 52% market dominance, regardless of the shape-shifting currently going on. 
• Bitcoin’s hourly chart technical indicators tend to show negative (sell) oscillators and an overall sell summary. However, the moving averages appear to be neutral. In terms of pivot points, S1, S2 and S3 indicate levels of 3862.7, 3827.1 and 3755.8 respectively. The resistance levels R1, R2 and R3 indicate Bitcoin will find it difficult to broach the following levels: 3934.0, 3967.7 and 4041.0.

A school of thought believes that Bitcoin will invariably show bullish signs in upcoming weeks. The most optimistic forecast is a prolonged uptrend with a slight gradient. Short-term, it is likely that Bitcoin will retreat from its current levels, as corrective forces get to work. In short, it's a difficult proposition to forecast future price movements, but current trends can certainly provide direction to traders and investors.