The crypto market could not inflate the bubble forever. Many market participants understood that the longer we observe how Bitcoin sweeps large resistance levels and round marks on its way, the more impressive the correction will be. The total market capitalization reached $386 billion by June 26, and from that moment the bears came on the scene, starting to sell off their assets. As a result, over the next day, capitalization declined by 21.5% to $303 billion.
From this point on, the market began a cautious recovery: Bitcoin is trading around $11’350, which is almost 18% below the local maximum. Analysts predicted correction of about 30% - thus, the market did not roll back as much as experts had expected. Judging by the data of Bitfinex, the number of short positions on BTCUSD is starting to decline, however, their amount is still higher than as of January 1, 2018.
According to FxPro analysts, the alleged catalysts for the new Bitcoin rally were the FOMO sharpening (the fear of missed opportunities) and the approval of an application for bitcoin futures with physical delivery from LedgerX. This means that other companies will soon receive the “green light” too. In addition, market participants analyzed the alleged new owners of crypto assets: judging by Google Trends statistics, the search phrase “Buy Bitcoin” does not even come close to the maximums at which it was in December 2017. Thus, indirectly, we can conclude that the new money flows in the market are institutional. It should be clearly understood that this is not the money of “crypto enthusiasts” who drove the 2017 rally. At the moment, the rally has a completely different structure, aimed at extracting the maximum benefit and "sharp exit” within the strategy.
The influx of institutional money can also be associated with a very tense situation in geopolitics: the US-China trade war, conflict with Iran, the dove mood of the Fed and other problems. Against this background, Bitcoin can be used by large investors as a way for diversifying their portfolios. Moreover, now there is no such asset that can show such astronomical profitability. The structure of the crypto market is liable to manipulations, and that plays into the hands of “Wall Street sharks”. Therefore, it is likely that even more significant volatility is ahead.
Against the backdrop of rising prices, hackers will rush to the crypto sector with new force. Crypto exchanges wallets are filled with huge funds, becoming desirable prey of hackers. Recently it became known about the hack of the Singapore crypto exchange Bitrue: ADA and XRP tokens worth $4.2 million were stolen. This is a very small amount compared to previous attacks, but in the near future, news like this will again become very common.
It is noteworthy that at the background of brutal market correction several altcoins show growth. Among them - ZCash (ZEC), which added almost 5% in the last 24 hours. The token demonstrated weak dynamics when the whole market showed double-digit growth. It is likely that investors, taking profits, came to the conclusion that this particular cryptocurrency has been particularly undervalued recently. In any case, in the coming days, the fundamental base of correction will be challenged. The best scenario for digital currencies right now is to consolidate around the reached levels at least for a week. The steady positions at the moment would be the best way to attract new retail investors. A new round of rally will almost inevitably lead to a large-scale correction.
FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.