Category Archives: Bear Market

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Bitten by Reality: Uncoupling Cryptocurrency from the Blockchain Industry

Bitten by Reality: Uncoupling Cryptocurrency from the Blockchain Industry

If 2017’s phenomenal crypto-market boom, supported by the entry of innumerable startups into the blockchain industry through initial coin offerings (ICOs) has taught us anything, it was that this fringe technology had some innovative gusto backing it, and it wasn’t going anywhere anytime soon.

Blossoming

Bitcoin at the time had most certainly cemented itself in modern discourse. For better or worse, it was making headlines all around the world as the market neared tipping point; regulators, governments, entrepreneurs and aspiring traders were catching a whiff of an unusual but golden opportunity.

Over that fateful winter, those few months from September 2017 to the end of January 2018 were significant in the sense that an immense amount of capital was poured into the ecosystem. Eventually, the speculative markets had to cool off and this moved the discussion away from Bitcoin, and on to the underlying technology of blockchain which is now considered to be a majorly beneficial technology for industries and governments around the world.

With this shift in attention and the ongoing global debate on how to regulate the sector, Bitcoin and the rest of the crypto-market waned throughout 2018, which by winter had the industry on the back-foot, forcing blockchain startups and enterprises to readjust their finances in a big way.

What seems logical now, was not actually practiced until it was a little too late, with the lesson being: don’t hold company funds in volatile crypto.

Recession

Consider this, an industry that miraculously rose to glory on the back of a volatile and speculative digital currency, Bitcoin, has also fallen fathoms due to the now ten-year-old crypto and the seemingly intrinsic connection of value to it that other cryptocurrencies have. An article on Bloomberg on 6 December 2018 shed light on the troublesome topic, detailing the collapse of startups and the layoffs that were unraveling. In addition, a previous report on 12 September 2018 compared the situation to that of the Dot-Com crash.

Major firms such as ConsenSys, STEEM, ETCDEV, and others were reporting layoffs while in tandem, the ICO startup market also fell sharply. 2018’s crypto-winter signaled a need for change for the blockchain industry, one that had already been alluded to with the increasing reports of stablecoins rising to prominence during these difficult times as foreshadowed by investment firm Morgan Stanley in March 2018.

Knock-on effects

With fewer startups raising their desired funds, and market uncertainty stifling crypto-economic activity, the blockchain media was also hit relatively hard, causing PR firms, ICO marketers and media outlets to also re-structure their businesses.

Blockchain and crypto-related media are known to be a pay-to-play facet of the industry. From fledgling startups to behemoth companies, this side of the business offers exposure in the form of featured articles, bought and paid for by the respective company, as well as press releases and article mentions amongst other means.

For the media companies who often pay their employees in crypto, this meant that the once neverending supply of well-funded enterprises and startups who were flocking to gain media attention were no longer able to afford the costs required to have their project seen on the pages of industry news websites. In turn, the space appears quiet, inactive and pessimistic, giving the doubters and naysayers all the more reason to declare the industry as dead.

This new technological frontier has done well surviving off of optimism and perseverance, but in the wake of a reality-checking market downturn, we can only hope that enterprises and companies around the world take heed and consider uncoupling the financial fates of their business from uncertain market assets. Instead, they could adopt a more realistic long-term view that can weather recessions and market downturns, one that minimizes the reliance on cryptocurrencies.

 

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Anti-Crypto Chinese State Media Says Bear Market Not Over Soon

Anti-Crypto Chinese State Media Says Bear Market Not Over Soon

The Chinese state-run media organization Beijing News reported that the cryptocurrency bear market is expected to continue into 2019.

Perhaps an unsurprisingly negative outlook is influenced by the country’s condemnation of Bitcoin and other digital currencies. Beijing News claims Bitcoin investments became a ”black hole” in 2018 with the coming year showing ”no obvious rebound” for the market.

2017’s bull run was called ”definitely unsustainable” by Xiao Lei, a currency policy analyst. Lei attributed the chaos of the run as leading to the unstable and declining market performance that followed.

Another issue raised by the Chinese analysts is a claimed ”zero-sum game” nature of the cryptocurrency market, meaning the only conceivable profits for investors are coming from somebody else’s pocket. From this perspective, the 2017 surge was an influx of less-informed newcomers to the market buying at higher prices, while seasoned traders made a quick profit off them.

Now the general public is more aware of Bitcoin and the cryptocurrency market with mainstream media covering the topic, the analysts believe newcomers would not fall for the same thing again, so to speak. As others are speculating, however, the influx of buyers may come in the form of institutional investors this year who often already deal in zero-sum markets.

 

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Bear Market Devours Cloud Mining Farm Giga Watt

Bitcoin cloud mining firm Giga Watt has declared Chapter 11 bankruptcy, leaving in its wake USD 10-50 million of unpaid liabilities. The cryptocurrency cloud mining industry and the mining industry, in general, is in an intractable situation due to the severe bear market of 2018.

The price of Bitcoin has declined from USD 20,000 to less than USD 4,500 in the past year. During the same time, the total cryptocurrency market cap has plummeted from a peak of USD 813 billion to USD 147 billion as of this writing on 22 November 2018. This price crash has drastically reduced cryptocurrency mining profits, to the point that in November 2018 numerous Bitcoin miners appear to be shutting down their rigs. In October 2017, Bitcoin’s network hash rate peaked at 60 Exahash/s several times but has now been slashed to 35 Exahash/s. That means there is 25 Exahash/s worth of rigs out there that simply cannot mine profitably at the current price level of Bitcoin.

Cloud mining needs higher profit margins than regular mining to function as a business since there must be enough profits to divide up between both the users and the cloud mining firm.

Giga Watt is leaving unpaid bills of USD 310,000 for a utilities company in Douglas County, Washington and owes Neppel Electric nearly USD 500,000. The top 20 creditors alone are owed USD 7 million but in total there is USD 10-50 million of debt owed by Giga Watt. To put this in perspective, Giga Watt only has USD 50,000 of assets, likely due to a long period of time where mining was not profitable, forcing the firm to burn through investor’s money to survive. Also, the depreciation in value of cryptocurrency mining rigs likely led to its total assets reaching such a low number.

Under the Chapter 11 bankruptcy laws there is a chance Giga Watt could reorganize and survive but that is up to a judge to decide. Surprisingly, the Giga Watt website is still operational and offering products, with no indication that the firm has declared bankruptcy posted on the site. This could perhaps be part of the liquidation process, with the company selling off its mining equipment to pay off a fraction of debts owed.

 

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Crypto Asset Manager Says Bear Market Coming to an End

Managing director of Crypto Asset Management, Timothy Enneking, said Monday that he believed the poor trading conditions in the cryptocurrency market were largely over.

He cited several reasons behind his prediction. Firstly, he theorized that many investors benefitting from the massive gains in the market last year, notably Bitcoin, chose to consolidate their profits and sold off their cryptocurrency assets. A significant number of traders doing this could viably create the recent market slump.

As well as this, Enneking noted that regulatory concerns were discouraging investors. Although he did not refer to any specific circumstance, India recently prohibited banks from handling cryptocurrency transactions, while the US Securities and Exchange Commission (SEC) subpoenaed multiple startups holding initial coin offerings (ICOs). The SEC confirmed dozens of investigations were being carried out.

Enneking also mentioned that to a lesser extent, the massive liquidation by an exchange platform user under the handle ‘Mt. Gox’ encouraged the market decline. He believed that startups selling off assets to cover salaries and expenses could also have been a contributing factor.

Market rebound

While these components have mostly been priced into the market already, Enneking commented on Bitcoin’s overall falling market share. He sees this contraction of Bitcoin dominance as directly related to the decline in correlation between Bitcoin and other currencies, as alternatives are beginning to have their value determined more by their own quality and popularity.

Despite the recent trough, Enneking’s report acknowledges that the cryptocurrency market is still up by over 600% in the last 15 months. The nature of recent contributing factors to the slump, combined with the larger scope of growth, are indicators for Enneking that the market will soon be rebounding.

Enneking’s firm, Crypto Asset Management, was founded last year and is responsible for managing approximately USD 20 million in assets. From its high in January, the company’s CAMCrypto30 index experienced a fall of 69%.

 

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