Very few people had any kind of hope left for Bitcoin to re-emerge from its slumber that we all called the Crypto Winter in 2018. However, 2019 seems to be just as amazing of an investment year as 2017 was when the first peak occurred.
Traders who entered positions at the beginning of the year are now enjoying 200% ROI, but those who managed to snag the price in June can say they’ve achieved a 346% ROI.
Changes during 2018 crypto winter
Many people say that 2018 was the disaster nobody wants to talk about, but those who’ve had at least some kind of experience in investing before going into the crypto market will tell you that
the winter of 2018 was the best time of their lives.
Why? Because those with experience knew that the sudden crash of cryptos was to be expected. They didn’t look at the market crash as something taking value away from Bitcoin, Ethereum or Litecoin, they were still focused on the volume and market capitalization
rather than the price.
For all of the major altcoins it was still in the “investable area”, thus garnering a little patience before the bottom cap of the crash was reached. All of those people that bided their time in 2018 and waited for coins to bottom out are now the ones enjoying
that 346% ROI on almost every single coin.
Many investors would refer to people investing in low capitalization coins and buying Bitcoin during the 2017 bubble as “dumb money”, meaning people who didn’t really know what they were doing, but thought that something being below $1 would immediately
classify it as the next Bitcoin. As we can all see, the maximum these below $1 cryptocurrencies have reached has been around 200% of their evaluation.
But that 200% was only collected upon by those who played the long game.
You see, people were expecting immediate gains due to the misconception of 2017’s bull run. Bitcoin increasing almost 100% in a few days gave an illusion that small cryptos would do the same as long as they are cheap. However, in January-February of 2018,
everything started crashing without a correction insight, thus convincing the newbies that their investment was a failure when in reality, all they had to do was wait a little more than a year.
Once these investors were filtered out, more experienced traders remained on the markets who knew exactly how to ride the volatility, thus keeping the growth consistent until Spring 2019 when the prices jumped. But there are other factors at work here as
Volume increased: The addition of margin trading
Bitcoin exchanges introduced margin trading, therefore leveraged trading to users, thus sometimes tripling or quadrupling their volumes, or even a lot more than that. Due to the fact that there is now an option to short Bitcoin on margin, and trade both
ways, it changed the volume aspects astronomically.
This is a very technical explanation, but let me try and break it down into pieces. Margin trading is something that a financial exchange allows its traders who are experienced. They provide the opportunity to “borrow” some money from the exchange for a
specific trade and return it once the trade is complete.
For example, if the leverage is 1:2, a person’s $100,000 trade would turn into $200,000 thus increasing the overall trade volume of that specific asset twofold.
The $100,000 that was lent to the trader will go right back to the exchange the moment the trade is complete, with an additional commission from the trader’s profits. Let’s say that you opened a position on BTC with $200,000 and the price jumped 100%. You
as a trader would make $200,000 in profit but return the $100,000 you took from the exchange, plus around $10,000-$50,000 as commission for using the leverage.
The fact that nowadays almost all the largest exchanges are offering margin trading, meant that the volumes were going to jump astronomically. Imagine, if the leverage on BTC was 1:5 on places like Binance and BitFinex, they would immediately project 5 times
as much trading volume for the coin, thus signaling to the whales that the activity is back on.
Speaking of whales...
New whales and institutional traders
A Whale is an extremely large investor, sometimes in the billions. What these people or often entities like to look at before making an investment is the volume. If the trading volume is high, this means that the asset will continue to be volatile over time,
thus have a higher chance of recovering from a fall.
This was exactly the case, BTC challenged numerous resistance levels over the course of 2019, while finally breaking through $10,000 and then to $13,000 at which point most whales believed the volume would start going down as the altcoin season was ushering
day by day.
The removal of a huge volume from BTC quickly dropped it as it was expected. Now the Whales are looking for a similar jump to something higher than $13,000 so that they could repeat the same process.
Most of these whales were Institutional traders, meaning large companies that have special accounts and dozens of people doing the analysis. Their trading patterns are usually the best to follow as they’re very rarely incorrect.
rumors of having Bitcoin ETFs appear in the US-inspired many crypto millionaires to make their own institutional crypto trading firm but lay in wait for the bill to pass. In the meantime, they simply speculated on large exchanges with even larger leverage
and margin minimums, thus keeping the volume stable.
2019 introduced projects that spread awareness
As much as crypto investors and blockchain enthusiasts may hate Libra, it can’t be denied that Facebook’s new project brought quite a lot of publicity to cryptocurrencies. The 2 billion users that this platform has had at least once heard about the new project
if they ever heard the name Facebook on the news or on some kind of news website.
The project has been going through a lot of scrutinies with regulators all over the world, which didn’t necessarily paint it in a bad way. Most people are anti-government, thus seeing a private company being chastised by them, they were more lenient towards
supporting the company.
However, this was also limited due to the fact it being Facebook’s project, which has been having serious issues with its PR lately due to the whole data selling scandal.
But still, it can’t be denied that millions of new people learned about cryptocurrencies and blockchain in general, and hundreds of thousands may have been funneled into the market without too many people noticing.
This, of course, also contributed to the increase of volume, thus the increase of price.
Positive sentiment about blockchain in the world
Although cryptocurrencies are based on the blockchain, it doesn’t mean that the technology is exclusively about these digital currencies. The technology is also very useful for databases and banking systems with its Distributed Ledger Technology.
Because of that DLT, several countries have started to take a much more positive approach to the industry.
In fact, some of the most outspoken critics of blockchain and cryptos, the Chinese Communist Party have concluded that focusing on the development of the technology should be a primary focus for the country in the future.
President Xi Jinping
made that announcement personally, which pretty much gave the blockchain community the equivalent of “breaking the internet”.
Other countries have also started considering creating their own digital currencies on the blockchain in order to pursue political goals and ensure a globalized economy in the future. But in the end, it’s the crypto market that benefits from it as it helps
spread awareness and introduce people to a bit more than just the CBDC (Central Bank Digital Currency).
What to expect in 2020
2020 will most likely be the year of digital currencies. China, the United States, the European Union, Japan, Australia, and various other strong economies could start considering launching their own version.
Naturally, China has already developed it and is waiting for Libra to launch so that it could counter it. Other countries would be given double the excuse to develop their own digital currency,
first to combat Libra, and second to combat the Chinese digital currency.
Talks in the European Union are already flaring up, while the United States is looking for staff to research digital currencies and stablecoins.
It’s very likely that in 2020, we will see the popularity of crypto soar to new heights, and maybe score a new all-time high for BTC as well.