Telltale Signs Crypto Market

Telltale Signs That the Crypto Market May Have Hit its Bottom

Has the cryptocurrency market hit its bottom? Bitcoin, the major crypto in the space with over 50% market dominance, is now trading for less than $4000 which is a far cry from its December 2017 peak of ~$20,000. The general consensus during the peak was that Bitcoin would break records this year and reach all-time highs, but in reality, the prices of almost all major cryptocurrencies plummeted. As with any nascent market, albeit with such extremely high-volatility, price drop are bound to happen. But the important question here is, has the market hit its bottom? Let’s consider some key developments which suggest it might have.

  1. Tech Giants Entering the Space

Blockchain technology still hasn’t found its killer use-case for it to legitimize itself in the eyes of doubters, but consider this, household names such as Amazon and Facebook are working on the technology.

Social media behemoth Facebook is reportedly working on a stablecoin to target the Indian remittances market, according to a report by Bloomberg. A stablecoin is a cryptocurrency that is pegged to real-world assets like fiat money, with the intent of minimizing price volatility. Interestingly, in January 2019, the company also acqui-hired a majority of UK based Chainspace’s employees. Chainspace is a blockchain startup founded by researchers at University College of London with the aim of augmenting current blockchain technology to realms beyond the financial sector.

Facebook is hardly the only tech giant exploring blockchain technology. Microsoft, Amazon and IBM are looking to create a conducive environment for enterprises and individuals, to leverage the various use-cases of blockchain technology for their businesses, through Blockchain-as-a-Service (BaaS).

BaaS will potentially enable enterprises to use cloud-based blockchain networks and set them up in just a few clicks. Amazon and Microsoft had revealed AWS Blockchain Templates and Azure Blockchain Workbench respectively, while IBM was significantly contributing towards the development of Hyperledger Fabric.

  1. Institutional Investors Increasing Exposure

In retrospect, institutional investors have generally shied away from the crypto space largely due to the lack of a regulatory framework in the space. Now, recent trends suggest otherwise with private funding in blockchain and crypto startups surpassing funds raised through private sales. In the last four months (OCT- JAN) capital raised from institutional investors alone amounted to a whopping $1.54 billion. Which is 36% higher than capital raised through public sales. Why are investors dipping their toes into crypto now? Let’s consider some possible reasons.

Firstly, ICOs managed to grab the attention of investors during the ICO boom period with the inordinate sums of capital being raised through public sales.

Secondly, after the regulatory authorities like the SEC classified ICOs as an ‘unregulated security’, entrepreneurs have found it easier to raise funds from private investors instead of a public token sale.

  1. M&A Activity in the Space Picks Up

As with any nascent market, consolidation in the market of leading enterprises heralds the market is maturing. In the past few months, despite the lingering ‘crypto winter,’ M&A activity in the space has maintained healthy numbers. According to data by InWara, in January 2019 alone, 8 M&A deals were observed in the space, and overall as much as 286 M&A deals have been observed till date. Of the various sectors in the nascent market, Trading and Investing sector leads the pack with 40 M&A deals. Allied sectors to Trading and Investing like Financial Services, and Fintech are also major contributors with 31 and 22 M&A deals respectively. The top three sectors combined contribute to almost 32% of the total M&A deals in the space. Indicating these sectors are most likely maturing faster.

  1. Crypto Friendly Governments

While countries like the US have taken a step back by classifying ICOs as an ‘unregulated security’, Singapore and UK authorities are taking a much more benign attitude towards the technology. These developments can be noticed in the number of ICOs from each country. The USA which used to be the market leader has been dethroned by Singapore and the UK in 2019. In light of this, all major countries observed negative growth in terms of number of ICOs. The US market leads the pack with 91%, the UK is not far behind at 80%, and Singapore observed the least negative growth at 61%. Higher negative growth indicates the market has relatively deteriorated.

Although these developments are not precise indicators of the market hitting its bottom, it does signify the technologies are being taken seriously by governments, enterprises and investors alike. These developments are likely to herald stable growth in the nascent space as well.