FxWirePro Poll: No near-term relief for Bitcoin; could see small gains next year

There will be little respite for the bruised Bitcoin this year, depressed by the United States Securities and Exchange Commission’s (SEC) announcement of more regulatory actions on the initial coin offering (ICO) over the coming year after Bitcoin plummeted under $6,000 to a new low for the year after months of stability, an FxWirePro poll showed.

But cryptocurrency experts forecast small gains in 2019, driven by a recovery in investors’ demand and renewed optimism among market players.

On Wednesday, November 14, the U.S. Securities and Exchange Commission (SEC) released their annual enforcement report, revealing dozens of actions that the regulatory agency took against ICOs and digital assets this year. On the same day, Bitcoin slumped under $6,000 to a new low for the year after months of stability.

Investors have generally shunned Bitcoin and have turned overly bearish after witnessing a heavy sell-off over the past few days, where the BTC/USD declined more than 10 percent. Along with that Bitcoin's market capitalization fell below the $100 billion level on Thursday for the first time in a year.

According to an FXWirePro poll, taken November 12-16, Bitcoin prices are forecast to remain at $6,000 mark by December this year. While the most popular cryptocurrency, Bitcoin, was predicted to gain a little to $8k by the end of next year.

No cryptocurrency strategist expects the BTC/USD to hit the $8000 mark this year. For next year, no organization expects the digital currency to reach at least the all-time high of $19,891.

So far this year, the BTC/USD fell sharply of over 70 percent to a 1-year low on Thursday, but the poll expects no further losses from here.

“Considering the intensity of declines already seen this year, if the market does break to the topside, it could be a bullish signal that gets the trend moving up again. But we would need to see a break above the July lower top at around 8,500 for confirmation. Until then, a bearish continuation back towards the September 2017 low around 2,975 cannot be ruled out,” noted LMAX Exchange in its November 15 report.

Despite Bitcoin’s price decline and a bear market trend, blockchain technology and cryptocurrencies became an attractive investment tool for private investors, venture capitalists and hedge funds in 2018. The market niche for infrastructure blockchain platforms in general bears little to no regulation risks. Current infrastructure blockchain projects mostly offer smart contracts, DApps or mining, noted strategists at ICORating.

According to a Reuters’ April survey, the smart contracts market is estimated to grow at a CAGR of 32 percent up to 2023.

IS CRYPTOCURRENCY A SOLUTION LOOKING FOR A PROBLEM?

"No, there are real problems in the global financial services ecosystem that cryptoassets are looking to address. More participation from the broader financial services ecosystem, will help drive trust and scale for the tokenized economy and help the crypto market grow and mature," noted Kiran Nagaraj, managing director at KPMG.

"The staying power of many cryptoassets will be defined by their ability to reduce friction and inefficiencies that currently exist within the global economy. Volatility is widely quoted as a significant limitation for the use of crypto for any use case. While volatility is certainly a problem, it is important to recognize that these assets are still fairly immature and will become less volatile as they mature. There are also significant efforts that are underway across the industry for the creation of what are called stablecoins to address the volatility problem."

The KPMG added in its latest note that as crypto matures, it remains to be seen if it will be a safe haven asset such as treasury bonds, a commodity such as gold, or a risk asset such as equities, or something else. The answer to this question lies in the level of trust crypto is able to garner from the market. Cryptoassets have the potential to increase trust via the immutability feature of the underlying blockchain technology. However, this alone may not be sufficient to generate trust without also embracing institutionalization.

SO, IS CRYPTO A BUBBLE?

According to a report from KPMG, bubbles in the economy are known for creating a lasting effect, say for example, the dot-com bubble. Cryptocurrencies are also sought to create a similar impact over the coming years since it is highly likely that the digital assets might not have received the value and market share that it has without excess liquidity in the financial system looking for a home.

On a larger scale, there are over USD16 trillion assets on all central banks’ balance sheets. The liquidity has made its way through into the financial markets and it is largely possible that the crypto market is one such beneficiary. Like the liquidity created in the wake of the Asian and Russian currency crises in the late 1990s, money has found an innovation to support.

At the peak of the dot-com bubble, while many businesses had restricted business models, many others had huge valuations. However, over the span of 15 years, it can be clearly seen that many of the businesses who had funded certain innovations in that bubble have created a lasting value, thus adding to building blocks of much of the innovation of the past decade.

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