Explaining surge after fall in cryptocurrency

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BY ANTONY MUTUNGA

Following the 2007-2008 global financial crisis, a white paper authored by Satoshi Nakamoto emerged in the world with one of the biggest revolutions in the history of the internet. As a result, the blockchain technology was created, accompanied by the first cryptocurrency; the bitcoin.

In the following years more cryptocurrencies such as ethereum, litecoin and bitcoin cash were introduced to the world.Even though bitcoin took a while to take off, when it did, it reached unbelievable heights. In 2010 the value of one bitcoin was equivalent to 0.0025 cents, seven years later, at the end of 2017, one bitcoin had grown to be valued at over Sh1.9 million ($19,000). Other than bitcoin, the case was similar for most of the other cryptos.

In addition to the Chinese government declaring bitcoin not a currency and imposing restrictions on its transactions as well as the collapse of Mt Gox, which held roughly 7% of all bitcoin in circulation, the value of a majority of cryptocurrencies, bitcoin included started to fall. After a majestic 2017, 2018 was the opposite for many cryptos as most people sold them off. As a result, for example, bitcoin saw its value dip to trade at Sh395, 000 ($3,898) during the last month of 2018. This sharp decline in the value of cryptocurrencies came to be known as the Great crypto crash.

Since the decline, majority of the cryptocurrencies have languished at a low price as compared to the year 2017. However, this did not last, during the start of April 2019 bitcoin saw a surge in its value as according to CoinMarketCap, one bitcoin was valued at Sh509,240 ($5,037). This was the first time the leading cryptocurrency had passed the $5,000 mark in four months. Since then bitcoin and a majority of the cryptocurrencies have been on an upward trend that has many crypto-holders optimistic of a bull run in the industry. Since the start of the year more and more people have been buying bitcoin resulting in its increase in value. The recent hike in bitcoin buy orders has been accredited to a recent massive buy order from a bitcoin whale, individuals or entities holding large amounts of bitcoin.

According to Oliver von Landsberg-Sadie, CEO and founder of BCB group which is a financial services group specializing in digital assets, the surge that boosted the price of bitcoin was as a result of a 20,000-bitcoin buying spree executed simultaneously on Coinbase, Kraken and Bitstamp. “There has been a single order that has been algorithmically-managed across these three venues, of around 20,000 BTC. If you look at the volumes on each of those three exchanges – there were in-concert, synchronized, units of volume of around 7,000 BTC in an hour,” he said.Following history, the big order caused many people, especially those who rely on algorithms to trade to make investments in large numbers. With bitcoin rising as a result, and being correlated to the other digital currencies, it caused them to rise as well. Bitcoin whales have continued to do massive orders that have seen the price of bitcoin reach about Sh758,250 ($7,500) in the second week of May 2019 according to the CoinMarketCap. For example, in accordance with Whale-Alert, another bitcoin whale did a transaction of 47,000 bitcoins worth Sh34.7 billion ($343 million) in the same month.

Financial institutions growing interest in cryptocurrencies has also played a role in the surge in the industry. For example, Fidelity investments, a Boston-based multinational financial services corporation which has over $2.4tn in assets under management, recently announced plans to start offering its institutional clients the ability to trade in number of digital assets such as Bitcoin and Ripple. Fidelity is not the only institution to have interests in digital currencies, J.P. Morgan Chase & Co, the sixth largest bank in the world by total assets according to S&P Global, also announced in February that they will be launching their own cryptocurrency known as JPM Coin. This was after its CEO referred to bitcoin as a fraud. In joining the crypto industry, the bank caused people to want to join in on the cryptocurrency craze.

Besides, the possible launch of a Facebook coin has seen those who were once sceptical of joining the cryptocurrency world to rethink their stance. Following the popularity of Facebook, a number of its users who are not on the crypto space are expected to join and learn in preparation for its coin. However, despite this causing the crypto space to increase, a majority of crypto-users are not in support of the coin following the company’s record when it comes to privacy.

Since regulated bitcoin futures contracts were launched on the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE), cryptocurrency ETFs have been a talk of the town as many people await the U.S Securities Exchange Commission (SEC) to approve. This is regardless of the fact that in 2018, none of the bitcoin ETF applications made received approval from the U.S. Securities Exchange Commission (SEC). However, with a number of the applications moved to this year and more being applied, for example the recent application by Crescent Crypto Index Services LLC, a subsidiary of Crescent Crypto Asset Management LLC, more people have become interested and joined the crypto space.

The fact that in some countries appetite for cryptocurrencies has increased despite the bear market has also resulted in surge in the industry. In South Korea, the number of investors has been on rise, moving from 6.4% to 7.4% in a year while the investments have also soared by 64.2%. Cryptocurrencies still have a long way to go before they can reach the peak, as they did in 2017, however, this is a start in bringing new life to the industry. Whether or not we are about to see another long bull run, only time will tell..