In the world of cryptocurrencies, the Spring of 2019 is starting to resemble the best of times and the worst of times.
Should holders of cyber-money such as Bitcoin or Ethereum be cheered by the modest price rally that came in with the New Year, by the announcement in early March that Samsung is to launch a cryptocurrency wallet and by the news that a gold-backed cryptocurrency will be unveiled shortly?
Or should they focus on the negative publicity arising from a cyber-money fraud in Sweden and on the news that Mexico’s central bank has imposed an effective ban on financial institutions in that country offering cryptocurrency services?
How can a trader put together a reliable cryptocurrencies forecast? What is the outlook for cryptocurrencies 2019?
Seeing a pattern
In stark contrast to 2017 when the future seemed to belong to these virtual, decentralised and government-free denominations, 2018 was torrid for cryptocurrencies, with a dire cryptocurrency market performance. This year was always likely to prove make or break, with either a return to steady growth and increasing acceptability or a falling away of interest in what critics had always claimed was a bubble asset, a sort of electronic chain letter.
So far, however, it is difficult to see which of these alternatives will prevail and a price prediction is hard to make, however thorough-going the cryptocurrencies analysis. Perhaps the best starting point is not the flurry of recent news items but with the key issue for all financial securities: the price.
Bitcoin is the best-known of all, being the most widely accepted. As with “Hoover” and vacuum cleaners, its name has become almost synonymous with cryptocurrency.
Currently, one Bitcoin is worth $3,833.71. A year ago, on 13 March 2018, before the big downswing, it traded at $9,145.41.
However, it is worth more now than one month ago, on 13 February, when it traded at $3.576.68.
Its low during the past year was on 15 December, when it traded at $3,183.
So, Bitcoin has some way to go to regain its peaks of a year ago, but is off its lows at the end of last year.
Again, bad news and good news.
Is this a general pattern? In short, yes. Ethereum traded at $119.20 a month ago on 11 February and is currently changing hands at $131.43.
Votes of confidence
A year ago, on 15 March, it traded at $601.98, and its 12-month low was $82.80, again on 15 December.
Litecoin currently changes hands at $54.71, having been $41.21 a month ago and $175.50 12 months back. Its low point over the period came on 27 November, when it touched $23.22.
EOS has followed a similar pattern, from $5.81 a year ago to $2.87 a month ago and currently $3.56, having hit a low of $1.72 on 7 December.
Two cryptocurrencies have seen their prices move in a slightly different way during the past 12 months. TRON is currently worth $0.359, higher than its value a year ago, which was $0.222.
One month ago, it was worth $0.243 and its low point on 27 November was $0.0116. Stellar’s price is also higher than 12 months ago, at $0.2939, against $0.1024.
A month ago, Stella was worth $0.0772, and its 12-monthly low point was on 13 February, when it traded at $0.0768.
In the cases of both Stellar and TRON, it seems suggestions by on-line commentators of important pending announcements may have supported the price.
For the sector more generally, as touched on above, the news has been mixed. Samsung’s cryptocurrency wallet, included in its flagship Galaxy S10, will be compatible with Ethereum and, in due course, is expected to extend this to other currencies.
Elsewhere, Fortune magazine has reported that “investors will soon be able to buy gold and stocks in the form of cryptocurrency, the same way they might buy Bitcoin”. Paxos, a New York-based company already offering a dollar-backed cryptocurrency will back its “cyber gold” with the real thing.
Both these announcements could be seen as votes of confidence in digital money. But there has been less welcome publicity, from Sweden, where younger consumers have been conned into buying worthless “cryptocurrency” in return for access to bargain-price luxury goods that never materialise.
Meanwhile, an announcement from Mexico’s central bank has made it clear that any financial institution holding an official licence, without which it is against the law to offer services to clients, would not be allowed to provide cryptocurrency services.
Which turning, then, are events in the cryptocurrency world likely to take – towards sunny uplands or into a valley of gloom? To start with, perhaps its best to recall the factors that turned the storming performance of 2017 into the travails of 2018.
One was an increase in problems with regulators, not the least cause of which were claims that some “initial coin offerings” – the launch of new cryptocurrencies – had been questionable, to say the least.
Then there was the return to more usual levels of interest rates as the “emergency” low borrowing costs introduced after the financial crisis were partly reversed. This took some of the shine off alternative assets, such as digital money.
Plus factors still in place
Finally, there was a loss of novelty. Not only were Bitcoin and the others no longer a shiny new product about which trendy “early adopters” could boast, but the proliferation of cryptocurrencies round the world – more than 1,500 at the last count – created not only confusion but perhaps a suspicion that many would prove, ultimately, to have little value, a price prediction heard increasingly during 2018.
But there are good reasons to expect these factors to become less important as the year moves on. Regulators should become increasingly skilled and experienced at sifting the sizeable and respectable cryptocurrencies from those that at best pose a risk to traders and investors and at worst, as in the Swedish case, are actually fraudulent.
In terms of rate rise, US borrowing costs seem to have paused for breath and talk of a global slowdown is an unpromising background for an aggressive monetary policy thrust.
And a natural process of consolidation is likely to shrink considerably the currently-bewildering array of cryptocurrencies.
Traders need to ask whether those elements that have underpinned cryptocurrencies’ popularity are still in place. Is financial privacy still valued, especially in a world of ever increasing private and public intrusion into personal affairs? Are there enduring concerns that paper currencies are prone to inflation? If so, is the role for a new type of money, one free of political control, likely to grow?
Should all three answers be yes, then it is reasonable to expect that cryptocurrencies will provide lively and profitable trading opportunities. That is not to make a hard and fast cryptocurrencies price prediction, rather to suggest that the prospects for 2019 are brighter than they may appear.