As we enter the new year, we can finally exhale, as the nightmare that was the cryptocurrency market in 2018 is over. While it’s possible that it could still go south from here, the year in which the price of Bitcoin fell by 80% is over. I’m sure by now you’re well aware that Bitcoin (BTC) shot up more than 2,500% from its 2017 low; to reach a peak of $20,000 by December 2017. The main highlights that transpired for the price of bitcoin over the past year are explored below. So, what has happened with bitcoin price 2018?
A quick look into the history of cryptocurrency headlines in 2018 shows that Bitcoin supposedly “died” 90 times according to the media. According to 99bitcoins, almost 100 of these claims surfaced last year alone as the price of Bitcoin trended down from ~$20,000 to a low of $3,130. When looking at Bitcoin’s price history in 2018, two technical developments caught my attention: The moving average cross, and the support of $6,000 breaking.
A moving average is exactly what the name suggests; An average of Bitcoin’s valuation over a specific time period. When plotted on a chart, they tend to provide support and resistance for the price as well as the strength and bias for a long-term trend. People often use multiple moving averages on a chart, complete with a bearish development named the “Death Cross”. This happens when a major short-term moving average crosses below a major long-term moving average. This is often an indicator of a significant loss of strength for the long-term trend.
On April 16, 2018, BTC witnessed a death cross between the 100 and 200 day moving averages, confirming the end of the 2017 bull market.
Before this death cross occurred for BTC, the price fell, finding support at around $6,000 during the month of February. Bitcoin continued to trade sideways at this price even as the price changed several times to test the support. Nine months later, the support broke on November 14, 2018. Up until then, many traders believed $6,000 was fortified as the bottom of the bitcoin 2018 bear market. This was due to bitcoin trading at around $6k for what felt like an eternity in the crypto space.
Read more about why cryptocurrency prices are dropping
The monthly trading volume for Bitcoin peaked around the end of 2017. In total, this brought approximately $70.2 billion through cryptocurrency exchanges in November, just before the price of Bitcoin reached its all-time high. Both trading volumes and the price of BTC have been stuck in a downward trend since entering 2018. In September, the monthly volume fell a mere $7.8 billion. This is an 88% drop from Bitcoin’s all-time high. Be that as it may, the volume performance for the whole of 2018 isn’t all that discouraging.
When looking at data from Coinmarketcap, I found a post from Satoshi Capital Research (SCR). It states that over $2 trillion in Bitcoin traded throughout 2018. As of December 1st, this is a 61% gain over the previous year. Even though it’s not the 96% increase we saw in 2017, it remains clear that investor interest is still peaked. It was growing substantially in 2018 regardless of the bearish market environment.
Besides a technical analysis, there are plenty of tools that can evaluate Bitcoins market conditions in 2018. Cryptocurrency researcher Willy Woo created a client that focuses on several bitcoin blockchain metrics as well as its relation to price and network value. This is the NVT Ratio. The Network Value Transmitted (NVT) ratio works as an emulator for the price to earnings ratio. This tool values a company’s stock price and does this by comparing the bitcoin network value with that of the value of funds transmitted through the blockchain.
If the ratio were to go over 100, it would suggest the Bitcoin price has outstripped the network value. Though on the other hand, a reading below 100 is an indicator that the market represents a truer value for BTC. In this scenario, the price is at much less of a risk of going through an aggressive downtrend.
When looking at the chart above, it can be seen that Bitcoin’s NVT ratio was far above 100 for almost all of 2018. In addition to this, Bitcoin even reached its highest level since 2011, touching just above 200. This is a confirmation that the market was significantly overvalued at the time. As a result, a drop in network value and price was almost inevitable. Also, it may be important to note that Blockstream’s liquid side-chain released on October 10th, 2018. As a result, some of the bitcoin volume is directed off-chain, so not all of the transmitted Bitcoin volume is being taken into account with the NVT ratio.
While it’s true 2018 was a poor year for bitcoin if you’re looking solely at the price, 2019 has the potential to be far greater. In regards to the value of Bitcoin (BTC), we can only hope that the price will eventually rise. I believe we will see bigger steps taken in terms of adoption. These steps will ensure that bitcoin will become a secure option in the traditional finance world. If anything, we could expect institutional investments to climb during 2019 also. This would pave the way for products such as the highly anticipated Bitcoin ETF.
This could easily become the best year for cryptocurrencies. If all you’ve been looking at for the past year is the price of cryptocurrency, you’d probably assume bitcoin is already dead. With low prices and sideways trading, many people would assume that now is a bad time to invest. In my opinion, now is the best time to invest. The lower you can buy in, the better. Remember: Buy low, Sell high!
Some people believe that Bitcoin will rise again, asserting market dominance, purging a vast amount of altcoins in its wake. A report published by A.T Kearney states:
By the end of 2019, bitcoin will reclaim nearly two-thirds of the crypto market capitalization as altcoins lose their luster because of growing-risk aversion among cryptocurrency investors. More broadly, financial regulators will soften their stance towards the sector. Our prediction that bitcoin will regain its dominance is supported by the ever-growing complexity among altcoins, most recently demonstrated by the ‘hash war’ that occurred in the bitcoin cash ecosystem. Additional hard forks and the continued lack of consensus among developers about a path forward will further widen the chasm between bitcoin as the most accessible and widely recognized cryptocurrency and the altcoin community.
2018 shows us all what the Bitcoin maximalists have been saying the whole time. Bitcoin is unique simply because it is decentralized. The advantages that come with decentralization are often discreet and very easy to miss. Regardless, they are real benefits and should not be overlooked.
With Bitcoin, entrepreneurs are given the responsibility of deciding what innovations will happen with their money and hard work. Altcoins, on the other hand, have a central committee that will decide which innovations and upgrades work best for the blockchain. With Bitcoin, individual actors will create products that implement BTC. For altcoins, the central committee commisions other entities to build programs and apps for them.
Bitcoin walks alone this year, separating itself from the other cryptocurrencies on the market, and it will continue to do so moving forward.
Will you be investing in Bitcoin this year? If not, what cryptocurrency do you have your eye on, and why? Let us know in the comments below!
This article is intended to educate and should in no way be seen as investment advice or an enticement to use the ice3x.com platform. Bitcoin is highly volatile with big profit opportunities but you should also remember that you could lose part or all of your investment whenever you take part in any high risk investment. Bitcoin trading is not a regulated industry in South Africa, which in itself carries additional risks. IF YOU ARE NOT AN ASTUTE BITCOIN TRADER, SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY INVESTMENTS.