The cryptocurrency market has fallen under intense pressure during Q1 of 2018, with Bitcoin down just over 50% from the start of the year. Many Altcoins have also seen their fair share of declines, with the biggest losers correcting upwards of 90% from all-time highs. Q1 was packed with action and drama including exchange hacks, exchange suspensions, increased regulation from China, Mt. Gox Bitcoin selling, tax talks, and SEC meetings in the United States. Uncertainty flooded the market due to these events with many cryptocurrency investors unsure if governments would ban cryptocurrencies outright, or just tighten up regulations in regard to initial coin offerings (ICOs).
Now smaller market cap crypto projects could soon be facing liquidity issues, preventing investors from selling out of their positions. The cryptocurrency market is fairly illiquid as is, and these steep declines do not help, should many investors choose to leave the market and close their positions.
Looking back in history, Q2 is often met with more optimism and bullish sentiment in comparison to Q1. Even more so now that we have many things to look forward to including Bitcoin ETF’s, and most notably, the Coinbase Index Fund that will give investors exposure to all digital assets. Exchanges such as QUOINEX, play an important role by using a bank-grade security system to protect data and assets.
Also, nations such as China seem to be moving in the right direction when it comes to regulation. China has stated that it will soon move in and begin to regulate cryptocurrency as opposed to an outright ban of the digital assets. Moreover, China now has a new blockchain fund with $1.6 billion, something which we have not seen before because 30 percent of the fund is backed by the Hangzhou city government.
With new investment products soon to hit the market, as well as nations around the world legitimatizing cryptocurrency with the talk of crypto taxes and regulations, it is safe to say that further adoption may be closer than we think. In addition to the availability of investment products, we also have strong fundamental news to look forward to.
Scalability is a major issue in the cryptocurrency space, and we are seeing solutions in regard to scalability becoming more mature as they prepare to hit the market going into Q2 of 2018. Many are running on TestNets and will soon be deployed to MainNets in the coming months. This will surely shed positive light on the space and solve arguably the largest problem affecting cryptocurrency right now – scalability.
With scalability solutions launching for Bitcoin and other crypto protocols in the near future, more participants will be attracted into the crypto space. This is due to the fact that transaction times will be reduced in addition to the reduction of fees per transaction. This was a large complaint at the height of the bull market, that it was very expensive to send Bitcoin from one wallet to another, discouraging the use for commerce and trade between individuals. With the Bitcoin Lightning Network, we can look forward to faster transaction times and significantly reduced fees, making it easier and more cost-effective. Schnorr Signatures will also be looking to replace Bitcoins’ existing signature method by combining signature data together. This will clear up tons of space in the blockchain which will aid in solving the transaction backlog as well as the high transaction fees.
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