The current status of crypto is something that many CFD forex traders are trying to work out as there are so many conflicting signs about which way things might be heading. With contract for difference trading, price fluctuations are welcome as the whole concept is based on predicting whether a long or short position is the right one to take. However, for crypto as an industry, current and recent price movements are only one factor in trying to work out exactly what is going on and forecasting trends for future trading success.
Crypto exchanges seem to be struggling to keep trading volumes high, but with important industry figures such as Litecoin creator Charlie Lee claiming that one Bitcoin will be worth $20,000 at some point over the next three years, there are still loud voices pointing towards a speculative environment.
Speculation
Upward price movements are driven by speculation and an overriding atmosphere pervaded by this feeling can lock-in a rising trend. However, cryptocurrency analyst Murad Mahmudov suggests that digital coins and Bitcoin, in particular, are suffering from a lack of people interested in getting rich by buying crypto.
Mahmudov points out that the number of tweets involving Bitcoin is at around the same level as 2014 and lower than it was at any time in 2016. “That is an absolute disaster for the price in the medium-term in my opinion”, he posted on Twitter. “Cryptocurrency’s biggest use case is speculation. That is a fact. For better or worse, Speculation and human greed are your biggest hope”, Mahmudov added.
Although high concepts such as decentralization and privacy are often seen as the driving forces behind the wider adoption of digital coins and the blockchain tech that they are based on, Mahmudov is of the opinion that most investors see crypto as a way to get rich.
“You need a complete price exhaustion and attention exhaustion from anyone except the absolute true believers […] I would even go as far as arguing that it would be healthy for the prices across the digital currency complex to collapse here. Transfer the coins from the weak hands to the strong hands who don’t sell no matter what”, he suggests somewhat bleakly.
Fund managers
Another industry observer, co-founder and partner at digital asset management firm Morgan Creek Digital Anthony “The Pomp” Pompliano, thinks that the current state of the crypto industry and related markets has much to do with the behavior of funds. “Without institutional investors who can write tens of millions of dollars per check, there is a low artificial cap on the amount of capital that can be raised across the crypto fund landscape”, he wrote in a blog post.
Some of the factors at play include a bear market mentality that has been taking hold and the result that institutional investors are becoming more risk-averse. “We need more seasoned investment professionals who understand the requirements of these capital allocators. We need more time to educate and demystify technology and opportunities. And most importantly, we need more funds showing multi-year track records filled with attractive profits”, Pompliano suggests.
Trading volume lows
Crypto exchange volumes hit lows in January 2019 that haven’t been seen since 2017,
the weekly cryptocurrency newsletter Diar reported. Binance’s Bitcoin/USD market dropped by more than 40% against its December 2018 volumes and that marks the now-largest token exchange worst performance for ten years. OKEx saw a period of growth over three months come to a halt in January and Coinbase’s BTC/USD pairing has been trading at lower volumes than in May 2017.
Seemingly going against this grain, creator of cryptocurrency Litecoin Charlie Lee has made a prediction in Litecoin’s Telegram chat that Bitcoin will be worth $20,000 “within the next three years”. However, Mahmudov has also predicted the next bear run for crypto will come around 2023 – 2024.
Any CFD forex traders looking for that all-important edge might do well to take Lee’s words to heart. as he has a history of getting his forecasts right. In 2017 he sold his whole Litecoin portfolio during the bull run in December, markedly proving himself right when the 2018 crypto crash saw dramatic prices fall.
At the time he tweeted: “Ok, sorry to spoil the party, but I need to reign in the excitement a bit… Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value (USD 48 to USD 4). So if you can’t handle LTC dropping to USD 20, don’t buy!” LTC subsequently saw a fall of more than 90%, currently trading at US $34.4 down from an all-time high of $60.66.
Future trends
The high-level discussions around regulating digital coins and continued plans for incorporating blockchain tech into established financial institutions and other uses means that the crypto sector is far from on its last legs. Furthermore, the continued interest in crypto exchanges from investors of all shapes and sizes means that current low volumes are more likely to be a blip in response to last year’s prices drops than a representation of declining interest overall.
Of course, this could all be very good news indeed for CFD traders. Volatility and price fluctuations are the bread and butter of taking positions for contract for difference trades, and with so much going on in the world of cryptocurrencies, digital tokenization and blockchain tech, it is sure to be an exciting year ahead.