After the Bitcoin crash in early February, many are wondering: what's next? Is it worth buying Bitcoin at lows or are the “golden days” of the first cryptocurrency already behind us? Illimar Mattus, CFO of the Tickmill brokerage group, answered these and other questions in an interview with InvestFuture.

What happened to Bitcoin in February? Do you see potential for growth in the coming months?

Indeed, last year ended too optimistically for Bitcoin. According to our trading platform, peak price in December was $19,348. Since this day we have seen a consistent decline in quotes.

From the point of view of technical analysis, just at the end of the year, the Bitcoin chart took on a parabolic shape - it is quite logical that we have now entered a consolidation phase. The euphoria must pass, this is normal. Some analysts believe the price needs to fall towards $6,000 before a recovery begins.

Strong support for Bitcoin is the 55-week moving average at $5,989. If this area holds the price, I would consider a recovery to $19,348 this year highly likely.

Illimar Mattus, financial director of the Tickmill brokerage group

What's next? After this we will find ourselves in uncharted territory. Some Bitcoin pioneers are talking about growth to $100,000, while others are even aiming for $1,000,000. And some of the crypto evangelists I spoke with do not name any quantitative goal at all. They hold Bitcoin simply because they believe in it. You know, this somehow reminds me of faith in God.

My personal opinion: in 2018 Bitcoin will fluctuate in the range of $5,000 - $20,000. And it is in this range that they are hiding Great short term trading opportunities!

What fundamental drivers for Bitcoin growth do you see? Or, in your opinion, is this more of a speculative story?

At a futures market conference in Singapore, I had the opportunity to listen to the Winklevoss brothers. They made an interesting analogy: the price of Bitcoin depends on the reach of users, just like the price of Facebook. The more users, the higher the price - because domestic demand increases. Therefore, it is the user community that is the main fundamental price driver. Everyone who opens a cryptocurrency account buys some BTC because it is the base currency. Then these people begin to look closely at other coins.

To track the dynamics of Bitcoin’s popularity and the size of the community, I personally use the Google trends service. It shows how many people Google the word “Bitcoin”. As you can see, Bitcoin search traffic peaked on December 22nd, 3 days after the record price was reached. Then interest in this word dropped noticeably - along with the price.

From the Tickmill side, we see the following: since the end of December, the trading volume of our clients has decreased significantly. Despite the fact that the price volatility is enormous and you can make money even on a fall! This suggests that the “hype” around Bitcoin is gradually subsiding.

Interesting observation. What risks do you see for Bitcoin now?

The main risk is regulation. Almost every day, representatives of the authorities of some country declare their intention to take control of the market, limit the use of cryptocurrency, ban ICOs, introduce taxation, etc. This is not surprising: market capitalization is already so large that it poses a systemic risk to economies such as South Korea, Japan and China. There, most of the population has already managed to invest in Bitcoin and other cryptocurrencies. If quotes fall sharply, people will lose a lot of money and file claims with regulators. Therefore, authorities are trying to take preventive measures to reduce this risk.

Another danger is that many “investors” in Bitcoin and other coins are completely unfamiliar with the technology behind blockchain and cryptocurrency. These people jumped on the train just because they were told it was cool and they could make money from it. This is why many Bitcoin users have no idea how it can be applied in the real economy. These people do not add real value to the cryptocurrency. They, on the contrary, make it more vulnerable, as the crowd inflates volatility and reduces the cryptocurrency's attractiveness for serious institutional investors.

What advice would you give to our readers? Should you buy Bitcoin now?

Personally, I don't own any bitcoins. In my opinion, the crypto industry is now experiencing a hype similar to the dotcom bubble in 2000. At that time, websites with the domains dog.com or flower.com could make hundreds of millions, even billions of dollars in IPOs. Moreover, all they had was a website and one employee, they didn’t even have offices. Most of the billionaire companies from that era do not exist today. Do you remember such names as Netscape, Altavista? They were once a big name in the world, but were defeated by smarter companies that were able to develop better products.

My personal plan is to survive this hype and watch the death of coins from the series of “flowers”, “dogs” and “cats”. I think that within a year it will be possible to create a portfolio of cryptocurrencies that have real intrinsic value.

I would advise all investors in Bitcoin and other coins to ask a simple question: what do you really know about the technology behind the crypto boom?? What is its value today and what will it be in a few years?

The information is the personal opinion of Illimar Mattus

What's Behind the Latest Cryptocurrency Market Crash?

Starting on Tuesday, January 16, the price of Bitcoin fell sharply, falling below $10,000 on Wednesday. Thus, since December, when the first cryptocurrency peaked at $20,000, the total decline was more than 50%. At the same time as Bitcoin, the entire cryptocurrency market as a whole experienced a serious collapse: if in early January the total capitalization of all assets in the Coinmarketcap list exceeded $800 billion, on Wednesday this figure at some point fell to $460 billion.

There is no shortage of theories about what is behind these events in various media and social networks, but one of the most popular versions has been the tightening of market regulations around the world, including in such key countries for cryptocurrencies as South Korea and China.

Let us remind you that over the past few days, reports have been actively spreading about a possible ban on cryptocurrency trading in South Korea, and although in the end the presidential administration of the country stated that there were no such restrictions, the rules of operation of exchanges and general conditions of the market are already in place.

Meanwhile, pressure from the authorities on the cryptocurrency industry in China continues unabated: the latest news from the Celestial Empire, which, as many analysts suggest, is also partly the intention to block access to local and foreign platforms for centralized trading, as well as to “online platforms and mobile applications offering services similar to exchanges."

The influence of South Korea and China on the cryptocurrency market is really great: these two countries account for quite significant trading volumes, but in recent days they have definitely begun to decline.

This trend has been noted by many experts, including eToro analyst Matty Greenspan. He also drew attention to the decline in volumes in Japan.

“As we noted, recently in South Korea and Japan there has been a downward trend in volumes. We may have seen a slight uptick yesterday, but this is still a far cry from what we may have seen in November and December,” Greenspan wrote in a letter to investors on Wednesday.

He supported his words with graphs from Cryptocompare showing a decrease in cryptocurrency trading volumes in these two countries:

At the same time, the eToro analyst explains the increase in volumes noted on Tuesday by the fact that prices for cryptocurrencies in these two countries, previously traditionally at a higher level, have recently, if not equaled, then at least come more in line with the rest of the world.

In addition to South Korea and China, one should probably note the repressive measures against Bitcoin and the increasingly frequent statements from politicians and officials at various levels around the world about the need for stricter regulation of cryptocurrencies. Also, the latest news from Russia and Ukraine is unlikely to add positivity, although their influence on the formation of the price of Bitcoin is not so great on a global scale.

However, are regulatory restrictions to blame for the collapse? Not everyone agrees with this theory.

Just a correction?

“The bloodbath in the cryptocurrency market is no longer provoked by South Korea, rather, it is the exponential growth of cryptocurrencies and a correction in order to stabilize the market.”

Dogecoin creator Jackson Palmer, meanwhile, says that while there doesn’t necessarily have to be a reason for such a collapse, the events of the last few days still seem a little different to him than before, since even trading bots could not prevent them.

While there doesn’t *need* to be a reason driving the current #crypto market crash, this dip feels different because even the market manipulating bots couldn’t turn it around.

I anticipate we’ll hear something in the coming weeks that (at least partially) explains this.

"Hopefully we'll hear something in the next few weeks that will at least partially explain this." Palmer added.

Futures

In addition to the reasons listed above, which in theory could have influenced the market collapse, another theory is given. According to her, the culprit may be Bitcoin futures, which have been traded on two large North American exchanges, CBOE and CME, since December last year.

The first contracts - January on the CBOE - just expired on Wednesday, January 17, and the settlement rate for them was determined by the auction price on the Gemini exchange at the end of the session. And as some experts suggest, the aggressive sell-off of the last two days is precisely due to the desire to lower the price of Bitcoin so that the closing contracts turn out to be winning.

This idea, in particular, was voiced on CNBC, noting that as early as Tuesday afternoon, CBOE futures were trading at $10,000, which in theory could give investors an incentive to force the price of Bitcoin to go even lower.

Has the bottom been reached?

As of 22:00 UTC on Wednesday, January 17, the weighted average Bitcoin rate rose to $11,450, and other cryptocurrencies went up along with it. As you can see in the chart below, after a protracted “red” period, the market is beginning to return to the green zone.

It is still difficult to say how events will develop in the short term. You can probably expect further market growth, but you should also be prepared for its high volatility and unpredictability.

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The cryptocurrency market experienced a huge collapse this week. Just recently, Bitcoin brought joy to its owners, and experts predicted it would reach 60 in 2018, and even . And then, out of the blue: a collapse!

Surely, since the beginning of this week, a rare Bitcoin owner has managed without Corvalol. The “father of cryptocurrencies” went into all sorts of troubles and dragged the rest with him. A week ago, when Bitcoin fell in price to , many decided that things couldn’t get any worse. And they were cruelly mistaken: on January 17, the Bitcoin rate fell below 11 thousand dollars, amounting to $10,491.

A bubble that can burst at any moment

A study by the international bank Citibank also added fuel to the fire. Bank experts published a report expressing their concerns about the impact of Bitcoin on the global economy.

Experts once again emphasized: Bitcoin is a “bubble” that can burst at any moment, thereby causing significant damage to the global economy. And developing countries will suffer the most from this, and Ukraine is among the five most vulnerable.

Among the Bitcoin problems that cause the most concern, analysts named high volatility (it prevents Bitcoin from becoming a store of value or transaction), too much energy consumption for mining, cybersecurity problems and the possibility of hacking the blockchain with quantum computers, moving the economy into the shadows, and “weak design.” ".

The bank's analysts do not rule out that in the near future other cryptocurrencies will prevail over Bitcoin and become a more reliable alternative.

If the bubble bursts and the value of Bitcoin falls to zero, the crypto wealth accumulated in a particular country will be destroyed. Thus, Citibank experts conclude that those countries in which the Bitcoin market makes up the largest share of GDP will suffer the most. They took the time to calculate the share of the crypto market in different countries and came to the conclusion that the most vulnerable country is Russia, where the Bitcoin share is 5% of GDP. Ukraine is in fourth place with an indicator of 2.5% of GDP. For comparison: in the USA this figure is 0.17%.

Causes and consequences

What happened to Bitcoin and what’s next for cryptocurrencies?

Last year, most investment banks in their client forecasts for 2018 pointed to the overheating of the cryptocurrency market and the risk of its correction, recalls Andrey Shevchishin, senior analyst at Forex Club. – In fact, having reached peak levels in December, Bitcoin corrected downwards: on December 17, the price of Bitcoin reached $20 thousand, and a month later the price fell below $11 thousand. During this time, investors switched to other currencies, starting to buy and shift to positions that had not grown so much. most pushing them towards growth. For example, ether started the year at $730, and last week reached $1,400.

This unbridled growth of cryptocurrencies greatly worries central banks and regulators. The fact is, Shevchishin explains, that some cryptocurrencies are purchased using credit funds, which carries significant risks for lenders and systems. Thus, according to LendEDU, payments for more than 18% of bitcoins were made from credit cards.

According to experts, the current sales were triggered by several main factors.

1. Statement by South Korea of ​​its intention to ban trading in cryptocurrencies, and this is neither more nor less! – up to a quarter of global turnover. A little later, the opinion was softened until virtual cryptocurrency exchanges were closed, but the final decision has not yet been made.

2. Statement by the Chinese authorities (China accounts for 80% of all mining capacity) about tightening control over cryptocurrency trading. We are talking about blocking access to offshore centralized trading platforms, measures against providers of electronic wallets and other trading platforms, and investigations into services for withdrawing funds abroad.

3. Statement by the Director of the German Central Bank, Joachim Würmeling, that the regulation of cryptocurrencies should occur on a global scale. According to him, national or regional rules are quite difficult to implement in a virtually borderless virtual community.

Further price prospects for the cryptocurrency market will depend on the level of market regulation in China and Korea, which account for about half of the global cryptocurrency turnover, says Andrey Shevchishin. - And although demand from buyers remains, especially given the significantly sagging price levels, there may be more sellers. So the speculation will continue. If we take into account the fact that Bitcoin grew 15 times in 2017 (from $925 to $13,650), then even a fall to $5,000-8,000 will leave a 5-8-fold increase in prices compared to the beginning of last year.

At the same time, Teletrade Group analyst Sergei Shevchuk is confident that although the decline in Bitcoin will continue, the global upward trend will still persist. And it is absolutely possible that in 2018 Bitcoin will test another historical high, breaking the $20 thousand mark.

By the way

On January 13, the number of Bitcoin coins mined reached 16.8 million, accounting for 80% of the total. That is, after miners mine the remaining 20% ​​and the number of coins reaches 21 million, they will become more difficult to obtain, potentially increasing the value of the cryptocurrency.

Let us remind you that today, for each block created, miners receive a reward of 12.5 bitcoins. However, according to existing rules, approximately every four years the mining reward is halved. Its next reduction will approximately take place in June 2020, after which miners will receive 6.25 bitcoins for each block.

But what hopes did Ether show when it cost $1000! True, even now it is impossible to imagine the modern world of ICO without a platform for launching Ethereum tokens. But what about the ETH cryptocurrency? Shouldn't the coin's value go up? Today we will touch on the fundamental side and talk about why Vitaly Buterin caused the collapse of Ethereum, literally “forcing” buyers to leave the Ethereum market.

Let's try to remember what happened before the collapse of the ETH rate. To begin with, I would like to clarify that the rate of this cryptocurrency, like 95% of the entire market, correlates with Bitcoin. But unlike altcoins, Ethereum’s peg was not so strict (the correlation percentage was lower).

“Thunder before lightning” for the value of the coin was Vitaly Buterin’s platform about “refusal of cryptocurrencies as a hype tool for easy money making.” In a post on Twitter, he expressed outrage at those who did not understand that there were fundamental differences between the project as a technology and as a cryptocurrency, which is purely speculative in nature.

Clarification. This was not about the Ethereum platform at all, but about blockchain-cryptocurrency projects in general.

How did this news affect? First the graph, then the explanations:

The statement came out around noon (red arrow on the chart). Then a heated discussion of this news began on Twitter and the media: Buterin’s statement was regarded as final and irrevocable decision to leave the Ethereum project.

Of course, Vitaly himself only wanted to emphasize how he was “harassed” by those who do not understand the conceptual differences between technology and speculation. As a result, he had to calm down the seriously raging crowd by issuing another post that he hoped for the “recovery of the crypto community.”

The post came out a few hours later, but it was too late: the media had already spread false information with “frightening” headlines. As a result, after the appearance of the second, “calming” news, the price went into a sideways movement, and some of the buyers who left during the first news returned to the market.

The Ethereum rate dropped by 15% during the news spread, losing $100. but the impulse went unnoticed amid the high volatility of cryptocurrencies at that time.

Buterin's investments: good for everyone except the ETH rate

Following the chronological sequence, we will continue to discuss the actions of Vitaly Buterin and their impact on our own cryptocurrency market.

2.02.2018 SENS Research Foundation, anti-aging research foundation, received from the "ether tycoon" $2.4 million as an investment, or approximately 2000 ETH at the exchange rate at that time. But what really happened?

In fact, more than 2 thousand Ethers were sold, and the market reacted to this almost instantly.

It is interesting that the sale was made near the $1000 level: remember, market participants gravitate towards round levels, like a magnet?

Of course, it’s not just a matter of momentum - other participants, seeing the downward push of the already weak cryptocurrency (at that time the rate dropped by $400, after testing the top at $1400), continued to push the market down. As a result of manipulation the rate fell from $1030 to $770, having lost more than 25% within 24 hours.

According to technical signs, the ETH cryptocurrency actually lost support: a final retest occurred before the breakdown of support.

A simple warning taken as an insider

17.02 Vitalik Buterin tweeted a message to investors that “if you are trying to figure out what is the best way to store inventory, then choose traditional assets.” This meant gold, stocks or real estate, but not a cryptocurrency at all. The crypto millionaire added that the price of the entire sector “could collapse to zero at any time.”

Poorly understanding “crypto investors” perceived this news as “insider” information from the co-founder of Ethereum - a hint at the weakness of the cryptocurrency. The news received publicity in Western media from February 18 to 19. Let's see if ETH quotes confirm this:

• the number “1” indicates the previous decline associated with investments in the anti-aging fund;
• area “2” on the chart is the time interval from February 17 to February 19. That’s when the news about the “zero value of cryptocurrency” spread. As a result, the ETH rate lost about 20%, or approximately $185. Note that the negative news coincided exactly with the level from which the previous fall started. This indicated that investors were deliberately negative about the prospects of this cryptocurrency.

Note that on February 22 (the last red candle during the 20% drawdown) reflected another sponsorship of Vitaly Buterin: another $763 thousand in ether was allocated for investment in MIRI, an institute for the development of machine learning.

Demand Collapse: OmiseGo Charity

On March 27, together with the OmiseGo team, Buterin invested $1 million in cryptocurrency to support refugees from Uganda. And although OMG tokens were transferred, the mention of the name of the Ethereum developer also affected the ETH rate: within a day the cryptocurrency lost 10% in value (as did OmiseGo):

Another fall in cryptocurrency amid Buterin’s charity

The consequences of this news were extremely unpleasant for Ethereum: on February 28 and 29, the ETH rate decreased by another 15%. On the technical side, quotes dropped below the demand level, and the bulls finally lost faith in the possible increase in the value of the cryptocurrency.

An attempt to regulate supply and demand: limit the amount of ETH

In an effort to create an artificial scarcity of cryptocurrency, the creator of ETH is limiting the number of coins to 120 or 144 million units. A number of problems arise that one way or another will have to be dealt with in the new conditions for the network:

1. Miners will be paid less for their work. The network must function without interruptions and malfunctions, not to mention maintaining anonymity and an appropriate level of encryption. Miners are essentially responsible for the health of the network. If their “efforts” are assessed less profitably, many may switch to mining more profitable cryptocurrency.
2. Supply will continue to exceed demand for a long time. Despite the decline in the ETH rate, today there are 98 million tokens in circulation: this means that at least 20 million will still be mined, thereby reducing investor demand for cryptocurrency.
3. The Ethereum blockchain is still not used anywhere, except in initiating an ICO. A blockchain that spawns other, private blockchains has absolutely no benefit beyond speculative value.
4. Since the ETH coin rate dropped by more than 70%, many investors consider the Ethereum project to be a “pyramid”, which means the platform will have to earn its reputation again. In a bear market, this is not so easy.

Regarding the creator of the Ethereum platform, Vitaly Buterin, the ambiguity of his sayings and actions brought chaos to the market of the second largest cryptocurrency by capitalization. By not supporting or showing any mental support, let alone financial support, by constantly investing in outside projects, the project creator has made it clear that the ETH course is not his concern.

The token depreciated, depriving Vitalik of more than half of his total capital.

Perhaps the young developer was too carried away with the development of blockchain-based platforms, forgetting about something important:

Any idea is not worth a penny without its implementation in real life. To implement any idea you will always need capital, often quite significant.

Investments in other projects and charity are good, but not when the capitalization of your own project is collapsing right before your eyes.

Now we can only hope that the Ethereum blockchain will soon find application not only in ICOs, but also in real life. After all, fundamental weakness in a falling market is a downward signal, and no one knows when and how to stop it.

Citing sources, China plans to tighten its policies on cryptocurrencies by extending the ban to online platforms and mobile applications offering cryptocurrency exchange services. The government plans to block Chinese users from accessing local and offshore trading platforms. Chinese authorities will also target individuals and companies that provide cryptocurrency markets, settlement and clearing services for centralized trading.

Another negative news for the crypto market was the possibility of a ban on exchange trading in South Korea. As Bloomberg reported on Tuesday, the country's Finance Minister Kim Dong-yong said that the closure of cryptocurrency exchanges in South Korea is possible, noting that a serious discussion of this issue between ministries is necessary. “The Treasury Secretary has made it clear that they are definitely looking at banning crypto trading,” said Neil Wilson, senior analyst at London-based online trading platform ETX Capital, adding that South Korea is the third-largest cryptocurrency market in the world.

“The drivers of market sentiment are primarily China and South Korea. In the first case, the authorities are trying to build the most rigid centralized scheme with its own subordinate infrastructure, which, naturally, should entail prohibitive measures in the Chinese crypto space. In the second case, cryptocurrencies follow the path of strong regulation to minimize criminal risks,” says Pavel Matveev, co-founder of the Wirex cryptobank.

In addition, the ban on cryptocurrencies in Indonesia, the third most populous country in Asia, adds negativity, Matveev notes. Recently, the Central Bank of Indonesia actually outlawed cryptocurrencies.

Destroyed hopes

Another reason for the negative dynamics is the disappointment of investors who bought bitcoins in anticipation of a continuation of the December rally (from mid-November to mid-December, the bitcoin rate approximately tripled). “People who bought Bitcoin in December and early January were expecting growth. Many did not realize that to continue growth they would have to wait six months, maybe a year. Those people who bought in December held Bitcoin while there was hope for growth, but then their patience ran out. People looked at the losses, and now the downward movement of quotes is causing panic, investors are selling cryptocurrency,” says Georgy Verbitsky, managing director of eToro in Russia and the CIS.

“Small investors who lack knowledge and skills do not understand that we are talking about long-term investment prospects,” agrees Smal. According to him, the influx of investors into the market has decreased. According to the Google Trends service, the number of search queries per week for the word “Bitcoin” is now 2.2 times lower than at the peak of interest in the cryptocurrency, which occurred in mid-December 2017, notes Smal.

Immediate prospects

According to Valery Smal, the fall of Bitcoin will stop around $11 thousand - large investors at this level can start buying cryptocurrency from small ones, who are now prone to panic. “Big players may start buying, and Bitcoin will slowly start to return to the top,” he says. However, much will depend on the news background, he believes.

“In the near future there will either be a sideways movement ($12-16 thousand range) or a further decline. The mass public entered Bitcoin in December, and they can continue to sell and push prices down,” Verbitsky believes. If the level of $11 thousand is broken, then Bitcoin will continue to gradually slide down. “The decline will not be sharp, it will be smooth and will be associated with ever-growing disappointment,” Verbitsky believes.

Aleksey Girin, co-founder of the venture fund Starta Ventures, is more optimistic. “We believe that a correctional movement is taking place in the market, albeit quite deep. We expect prices to quickly recover to the level of a week ago - $14-15 thousand per bitcoin,” he says.

Operations Director of the BankEx fintech platform Dmitry Dolgov also suggests not dramatizing the situation. “Any market always moves in waves, and the cryptocurrency market is no exception,” he says, arguing that demand for crypto assets remains high. The market has previously been subject to strong fluctuations: for example, on December 17, 2017, Bitcoin at its peak cost $20.09 thousand, and on December 22 it fell to $11.83 thousand.

Sad forecasts

Prime Minister Dmitry Medvedev said on Tuesday that it is currently impossible to “completely rule out” the scenario of cryptocurrencies disappearing, as happened with the many companies that emerged from the emerging Internet in the early 1990s and ceased to exist in the early 2000s. “But the technology itself, I mean the Internet, has not only survived, but now plays a key role in our lives. In the same way, in a few years, cryptocurrencies may disappear, and the technology on the basis of which these cryptocurrencies are developed - I mean blockchain - will become part of everyday reality,” Medvedev concluded.

Last week, billionaire and legendary investor Warren Buffett predicted a “bad end” for the cryptocurrency market in an interview with CNBC. “When it comes to cryptocurrencies in general, I can say almost certainly that they will come to a bad end,” he said. At the same time, Buffett noted that he does not know “when or how this will happen.”

Investors “should be prepared to lose all their money” invested in bitcoin, Bloomberg quotes the chairman of the European Securities and Markets Authority, Stephen Major. It is a highly volatile asset, which undermines its use as a currency, he notes.​​