The cryptocurrency market has fallen below $250 billion in market share today.
That leaves many investors wondering why we are still falling. While cryptocurrency analysis experts have been calling the bottom for some time are we really there?
While an end of the year dip is normal in any financial market this year has been particular brutal on those holding volatile digital assets known as cryptocurrencies. In addition to the year end dip a massive amount of bad news has also plagued the crypto space, further shaking investor's hands and frightening many into exiting the space entirely.
Whispers of alternative currency bans in China, ransomware attacks where criminals demanded Bitcoin payments, the settlement of the Mt Gox lawsuit, and the general panic that ensued have caused many assets to tumble well below normal correction levels.
However, those coins also experienced exponential growth in the months previous to the dip. So, that begs the question: Have these assets now simply corrected to their real value now that fly by night investors have been shaken out? It's hard to say.
The second question on everyone's mind is when exactly we can expect this dip to correct. While many investors are likely expecting to one day wake up and magically have all of their lost capital appear in their portfolio it's not a likely scenario.
In order for cryptocurrency to recover a catalyst will be needed. Once Bitcoin broke the $20,000 mark it garnered mainstream media attention, and new money looking to make a fast buck flooded into the crypto space. While this seemed like a plus the fact is that new money that has no knowledge of what they are investing in is very dangerous.
Some of these investors took out loans to fund their investments or gambled away their college tuition. Even with an appropriate catalyst it's likely that money will be much slower to trickle into the market this time around. Many are still playing it safe, and it's hard to blame them when their money could vanish in a couple of seconds when a hint of bad news hits social media.
Unfortunately, there's more pessimism setting on the horizon as well. Wall Street analyst Thomas Lee is estimating that the upcoming tax season may cause another huge sell off in crypto. He reported through CNBC, that he believed US households could owe around $25 billion in cryptocurrency related taxes to the IRS.
Once these investors figure out how much they will owe the IRS for their trades they may be forced to sell additional assets to cover the cost. In addition, he believes that exchanges, who keep much of their capital in assets such as Bitcoin and Ethereum may sell off for tax reasons as well. This could mean a lot more sell pressure for the month of April on the already bleeding cryptocurrency market.
This forecast does have a silver lining though as it could signal a brighter future for Bitcoin and other alternative currencies after the tax settlement occurs. Many people will be getting refunds from the government, and once their taxes are handled they could very well start funneling that money back into additional cryptocurrency investments.
Despite the plethora of bad news, and the impending tax season, some assets are beginning to show a little green sprouting up. Many in the community are forecasting sunnier days as soon as mid April, but that seems very soon. Other more pessimistic responses are pointing towards the end of the year before they expect cryptocurrency will make any sort of reasonable recovery.
As for my own analysis I'm looking at somewhere around June for the markets to begin picking back up. In the mean time, the projects themselves are not halting or crying. Instead, they are continuing to develop their respective technologies, and eventually one of them will be so good that the world will stop trying to pretend crypto does not exist.
Last time, it was for a massive surge in the price of Bitcoin, but hopefully this time it will be for an innovative blockchain technology that people see as actually useful instead of something they try to use to get rich quick without doing any research.
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