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Vinny Lingham: Crypto Market Won’t Recover Anytime Soon

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a general partner at Multicoin Capital and the CEO of Civic, believes the crypto market won’t recover any time soon.

He said:

The crypto market will rise again, but most likely only when the pain of the recent fall becomes a distant memory. Don’t underestimate the power of psychology in free markets.

Why Crypto Could Take a Long Time to Recover

bitcoin price ethereum ripple xrp
Top cryptocurrency assets including bitcoin (blue), ethereum (red), and ripple (orange) have taken steep losses over the past several days.

In 2017, the crypto market saw one of the most intense bull runs in its decade-long history fueled by the sudden emergence of retail traders and individual investors in regions like Japan and South Korea.

At one point, the demand for crypto in South Korea surged to a point in which the premium of the Bitcoin price achieved 20 to 30 percent. When Bitcoin was trading at an all-time high at $19,500 in the U.S. market, it was trading at over $23,000 in South Korea.

At the time, investors of all ages from teenagers to middle-aged employees invested heavily in the cryptocurrency market. Many investors saw their neighbors getting rich off of crypto and could not resist.

Teenagers utilized their parents’ bank accounts without authorization to purchase crypto and many individuals in their 40s that felt stuck in their jobs that pay less than $30,000 per year — the GDP per capita in South Korea is $29,742 — invested in crypto, seeing a glimpse of hope.

Nathaniel Popper, a journalist at The New York Times, reported that Kim Hyon-jeong, a 45-year-old teacher and a single mother, invested $90,000 into cryptocurrencies in the fall of 2017, $25,000 from a loan.

South Korea bitcoin cryptocurrency
The crypto crash has been hard on investors in South Korea.

In South Korea, especially in the outskirts of Seoul, teachers are paid on average about $3,000 a month, and with the irrationally high rent costs at the capital, the majority of teachers and government employees are left with less than $1,500 to save on a monthly basis.

As crypto prices plunged, Kim lost most of her money, which may take well over 10 years to recover considering the interest on the bank loan she acquired.

“I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us. I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around,” she said.

Even now, after the fourth largest bear market in the last 10 years, cryptocurrencies are recognized as a sign of hope for millennials that have given up on the idea of obtaining a stable job, earning enough money to purchase a house in Seoul, and getting married due to the declining economy of South Korea.

Regardless of how millennials perceive cryptocurrencies in markets like Japan and South Korea, it could take a long time for retail traders to psychologically recover from the three-month period from November to January of 2018 when prices spiked by well over 200 percent and plunged to extremely low levels.

How Long?

On average, it has taken the crypto market 62 weeks to recover from major corrections, approximately a year and three months.

But, because of the mainstream media coverage it received and the exposure it gained, crypto could certainly take longer than a year and a quarter to fully recover.

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Crypto Money Managers Unleash Social Media Algos to Predict Bitcoin Volatility

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Money managers are hungry for yield. Crypto continues to outperform just about any other asset class making this nascent market a hot-bed for alternative prediction solutions. And social media algos are front and centre of that speculation.

Cryptocurrency prices, like foreign exchange, are largely decentralized providing plenty of opportunities for smart programmers to profit from the difference. But can those same programmers hone their craft to take advantage of a new form of opportunity, social media sentiment analysis? Some seem to think so.

Reddit Gossip. Social media algos.
A high-level overview of cryptocurrency gossip via Reddit. Source: CoinGossip

Funds Head-Hunting Algo Programmers At Alarming Rates

Sentiment analysis is not particularly new, but crypto is. And retail investors don’t hang out in private meeting rooms and exclusive restaurants. They hang out on Twitter and a whole host of other digital mediums. Good-quality programmers who can tap this diamond mine are in high demand.

One report revealed that the number of blockchain job postings has soared to 4,086%since 2019. The large majority of those likely data-driven roles. According to PricewaterhouseCoopers, quantitative crypto funds significantly outperform their peers’ thanks to the analysis of online crypto chatter.

Coders with machine learning skills are particularly highly sought after. One Taiwan-based expert even used crowdsourcing to build an analysis algorithm. Mark Howard explains:

“It’s pretty hot right now, any fund that’s worth their salt, they are devoting some of their resources and allocation for sentiment analysis.”

Fake News and Paid Views

If you were thinking about jumping on the bandwagon, realize that sentiment analysis is not the holy grail of all crypto predictive analysis. At least not yet. Platforms like Twitter, Facebook, and Reddit are still plagued with bag-holders and marketers looking for every chance to punt their own coins.

BitSpread, a blockchain asset management advisory in London has built its own social media algo but warns of the dangers. In an interview with Reuters, CEO Cedric Jeanson explained:

“The sentiment itself, what we see on Twitter, can be really geared toward fake news. We are always very cautious about what we’re reading in the news because, most of the time, we’ve seen that there’s a bias.”

Scraping the most relevant data is no easy task. Indeed, getting an accurate picture of what people are trading compared to what they are saying is tricky. Part of Bitspread’s algorithm focuses on cryptocurrency exchange posts that highlight trading positions. Similar to this:

Bitmex rekt. Social media algos
Well-established exchange Bitmex reveals regular trading liquidations. Source: Twitter

Retail Interest Not Catching up in This Crypto Bull Run

The jury is still out on how successful this approach will be. Despite Facebook’s Libra recently surpassing Bitcoin on crypto Twitter, the latest Google Trends data is not very encouraging.

Bitcoin interest over time. Social media algos.
Retail interest has not regained its 2017 highs. Source: Google Trends.

While Google search interest for Bitcoin was at its highest 2019 level in June, it’s still well off the 2017 highs. Meanwhile, the price has rallied to $14 000, not far from its all-time highs. The data suggests that retail investors may not be driving this bull run as in previous years.

That could ultimately put a spanner in the works for crypto social media algos considering that institutional investors are highly unlikely to post their trades via social media. Either way, it’s early days and the volatility afforded by Bitcoin still offers potential lucrative gains.

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Bitcoin Correction to $9,500 Could Be Followed by 20% Drop: Analyst

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Bitcoin (BTC) has been absolutely slammed over the past week. Since passing above $13,000 for the second time this year last Wednesday, the crypto has been on a clearly downward-sloping trend.

In fact, as of the time of writing this article, Bitcoin has lost 25% in the past week, falling to as low as $9,300.

Despite the fact that optimists are expecting for bulls to experience some form of short-term reprieve, historical trends and other key indicators predict a further unwinding of the cryptocurrency bull market.

Bitcoin Poised to Hit $7,500

Conceptualized by Trace Mayer, an early Bitcoin investor and funder of Kraken, the Mayer Multiple is a way of determining if BTC is either overbought, fairly valued, or oversold. It is calculated by putting the asset’s current price over its 200-day moving average.

Per an analysis of this indicator (currently sits at 1.6) by CryptoKea, a little-known analyst that accurately called the recent drop to at least $9,700 earlier this month, if you consider the Multiple, the ongoing correction looks much like the first “major correction” of 2017’s bull run.

He notes that if history repeats itself and Bitcoin reverses out of its current short-term bearish trend like it did in 2012 and 2017, it could find support anywhere from $7,148 to $8,700. This corresponds to 1.20 times to 1.46 times of the 200-day moving average, which currently sits at $5,957.

Most likely, however, Kea notes that the “most probable target” as per the use of the Mayer Multiple will be $7,505 — another 20% drop from the current Bitcoin price of $9,600.

This somewhat lines up with the target of $8,000 that other analysts hold. Per previous reports from NewsBTC, Timothy Peterson, a prominent American crypto fund manager, notes that Bitcoin’s current active account figure suggests that BTC is overvalued.

According to Peterson’s model, which takes a 30-day median (as of July 13th) of the number of active accounts on the Bitcoin blockchain, BTC currently has a fair valuation of just above $8,000.

In a tweet issued on Saturday, Josh Rager, a prominent technical analyst and cryptocurrency commentator, looked to this same level. View image on Twitter

Rager notes that a “confluence” of chart data and on-chain data suggests that a pullback “would likely bottom out at $8,000”. As he explained in the chart above, $8,000 acted as a key horizontal support and resistance level in the recent rally and 2018’s crash.

What’s more, there is also a CME Bitcoin futures gap around $8,500, which is one of the last gaps waiting to be filled.

And as Alfonso Esparza, senior market analyst at Oanda Corp, recently told Bloomberg: “[Bitcoin] continues to trade lower as comments from President Trump put downward pressure on the cryptocurrency. It could fall further to $8,000, giving back all the gains made in June.”

Drop Might be Over?

Despite this, one analyst believes that the drop is most likely over. In fact, he drew attention to almost five signs why this may very well be the case, even if it sounds crazy.

Firstly, the one-day Relative Strength Index (RSI) and the Stochastic iteration of this indicator are at their lowest levels since at least February, entering the “oversold” range. The one-day Moving Average Convergence Divergence (MACD) has tapped the zero level, despite the fact that Bitcoin is in a raging bull market according to most analysis.

Also, the Elder’s Forse Index, an indicator meant to exhibit the strength of moves, is at its lowest since November 2018; and historical volatility is almost at 100%, implying a move to the upside to return volatility to levels deemed normal.

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Bitcoin Network Is Moving $3 Billion Daily, Up 210% Since April

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Bitcoin’s average transaction volume is topping $3 billion per day, data from crypto analytics site Coinmetrics.io reveals as of July 16.

Bitcoin’s Uptrend in Daily Transaction Value Eclipsing Altcoins’

The data — which has been adjusted to remove noise and certain artifacts, per Coinmetrics — shows an impressive uptrend in the USD value for the volume of the coin’s transactions and transfers over the past 90 days.

On April 17, the average daily value was at $1.04 billion as compared with $3.22 billion on July 16, an almost 210% increase.

The top coin has seen a significantly higher spike in volume as compared with ether (ETH), which saw a 77% increase over the same time period — from a daily average of $370 million to $657 million. XRP has seen a still milder uptrend, at 61% — with the value of daily transactions climbing from $152.5 million in mid-April to $245.6 in mid-July.

Chart

3-month chart for BTC  transactions, transfers, value, adjusted, in USD. Source: Coinmetrics.io

(Non-) Correlations

Bitcoin broke the $3 billion daily average mark on July 11, Coinmetrics’ data shows, when the coin was circling the $11,500 price point. Despite trading roughly $2,000 lower as of today — having taken a steep 11.4% hit on the day and over 24% on the week — average daily transaction value has continued to climb.

Commentators have today argued that the coin’s short-term downtrend was triggered by an antagonistic response from the United States government to Facebook’s Libra coin, which has extended to the cryptocurrency space more broadly.

Veteran trader Peter Brandt anticipates that total market cap could now correct by as much as 80% — yet argues that most of the damage will be shouldered by altcoins, not Bitcoin.

On July 7, Cointelegraph reported that Bitcoin’s hash rate had hit a new all-time high of 65.87 EH/s. Nevertheless, despite the week’s price fluctuations, this figure has continued to soar north, reaching almost 73 EH/s to press time.

source:.fxstreet.

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