If you look at the course overview and Charts of the individual crypto-currencies in the last days, will not have much joy. For days, weeks, and months, the red Numbers, and thus the bear will dominate the crypto market. In the following article we would like to go to the causes of research, as well as to settle the question of whether crypto-currencies in a bubble, and whether this is the beginning of the end.
We come right to the point. Crypto-there are currencies in a bubble? In order to clarify this question, it is first helpful to understand how a bubble is defined. For this purpose, we resort to the “Phases of a Bubble”Model of Dr. Jean-Paul Rodrigue, which has expanded the Gartner Hype-cycle on an investor’s specific variant.
According to the Model of 4 distinct phases: Stealth, Awareness, Mania and Blow-Off Phase. In the first Phase, the product, here crypto-currencies is still quite unknown. The rate increases only slightly. In Phase 2 (Awareness Phase), more and more people to the product. Phase 3 is marked by an increased media presence, a strong euphoria and, ultimately, of a veritable hysteria (Hype). This Phase ends with the all-time high of the course. In Phase 4, the price drops sharply. First of all, only “fear and panic prevails”, which later leads to a surrender of the investor and an extreme price decline.
In order to examine the allegation of a bubble, we made the Model of the Bitcoin price from July 2017 to March 2018. Simply to look at the curves, it is noticeable that there is a certain Resemblance. From September to early November, the Bitcoin has received increased attention. November and December began, the Mainstream media, for crypto-currencies and to be of particular interest to Bitcoin. There was a real sense of right-wing delusion, the euphoria was unabated. In the case of the all-time high of USD 20,000 was the end for the Bitcoin.
Bitcoin and Altcoins 60 to 90 percent from all-time highs in the Minus
Since the all-time high, all crypto are currencies with 60 to 90 percent from their all-time high in the Minus:
So the crypto-currency burst bubble?
From our point of view, there are Similarities to the dot-com bubble, however, can currencies be spoken, in our opinion, a flat rate for all the Crypto of a bubble.
The trigger of the boom and the Dotcom bubble, the high profit expectations, as well as the many speculators have bet on rising stock prices were at the time. The new technologies such as the Internet and the mobile phone, as well as its establishment led to a gold rush mood. As a result, many Startups were founded and just wanted to have something of the interest and the money of the greedy investors.
A similar situation is observed now. As is the case with the Dotcom bubble in recent months, many Start-up was founded-Ups in the crypto-Sphere that have brought a crypto-currency on the market. In the framework of ICOs (instead of shares), they have collected millions of dollars in capital to Finance your project without a working product to show.
In particular, the period from the end of November 2017 until the beginning of January 2018 was characterized by a delusional, led by the dynamics of Bitcoin and Ethereum,. Investors were in a frenzy, the dominating of them was to miss the “new Bitcoin” (“Fear of missing out”), and to want to be the next millionaire. People invested blindly in the crypto currency market and a certain currency, without knowing what crypto-currencies actually are, what they stand for and what is the goal of the special crypto-currency to be pursued.
This could not emanate from our point of view. Investors who have invested in Phase 3 (the Mania Phase), the blind, are now frustrated and have to accept significant losses.
In our view, the market is currently in a Situation where the Frustration (according to the model’s stage 4) dominated the market. Although there is no extreme, strong negative messages, the foundations of Bitcoin and Ethereum doubt, is the entire market in a tailspin. Our explanation for this is that the “little man” or “the little woman” has lost Faith in crypto-currencies. In December resulting dream of Bitcoin millionaire is off, and seems out of reach.
Why Bitcoin is no bubble?
In our opinion, it requires only an adjustment of the market. There are now over 1,600 crypto-currencies. This is simply too much. Ultimately, even 100 crypto are likely to be currencies to a lot of, all of which can have a real Benefit.
Who currencies of the basic ideas of Cryptography, specifically of the established crypto currencies such as Bitcoin, Ethereum, ZCash, Litecoin or Monero or innovative crypto of the new Generation currencies will come to the conclusion that crypto-currencies have a legitimate meaning and purpose. Crypto-currencies can significantly contribute to the improvement of the everyday life of every human being.
Crypto all can solve currencies, the fundamental problem of Fiat currencies. The Problem is that there is a need for trust in order for the System to work. The Central Bank must be trusted not to devalue the currency. The banks must be trusted that they will keep our money and transferring it. The history of Fiat currencies has shown that banks, as the financial crisis was a few years ago, very clearly, this trust is abused. They lend money, even though you only have a fraction in Reserve. Customers need to trust the banks not only your money but also your privacy.
Just as after the dot-com bubble, there will be, in our opinion, crypto-currencies will go as a winner of the “bubble”. This will survive, similar to Amazon, Ebay or Google, the dot-com bubble and emerge stronger from the period of weakness.
When will it come to the next Bull-Run?
The bull market at the end of last year was probably worn by “small” investors and non-institutional capital. In order to initialize a new bull market, it is necessary, in our opinion, a new capital (e.g., Bitcoin, ETFs) and/ or a substantial further development (from a technical point of view) of the crypto-currency market to a new Era. Predestined the Bitcoin Lightning Network, or the scaling solution Sharding of Ethereum is from our point of view. The productive use of both scaling solutions would give the crypto currency market is probably a significant Push.
The CEO of Abra, Bill Barhydt about the capital in a similar way. In an Interview with Business Insider he stated that in his opinion, be only a matter of time until institutional capital in the crypto currency market flows. Once that happens, there will be no stopping and the next bull market:
I talk to hedge funds, high-net-worth individuals, and even commodity speculators. They look at the volatility in the crypto markets, and they see it as a huge opportunity. Once that happens, all hell will break loose. Once the floodgates are opened, they’re opened.
One of the Mainstream media, and chart analysts hotly debated topic is the Bitcoin “death cross is currently”. This derives from the crossing of the 50-day (short-term Trend) and the 200-day (long-term Trend) gliding average of the Bitcoin price. The moving average of the short-term trend falls under the of the last 200 days. Analysts see the death of the cross as a warning for a further Downtrend, and massive exchange rate losses.
Whether the technical chart analysis but can be applied to any crypto-currencies, is at least questionable. On the contrary to the “traditional” market, there is a long-time experience (an example: in September 2015), it could be concluded from the analyses of the circuit. In this respect, one should not take the death cross as a guarantee. Scaremongering is, in our view, misplaced.
Even if the bear has the crypto-market is currently still under full control. We are optimistic that at some point the next “Bull Run” will come. If then still all 1,600 crypto-currencies, is doubtful.
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