Capital.com Research TeamCryptocurrency Market Overview
The cryptocurrency market is a cycle of FOMO, JOMO and panic sells. Interestingly, beneath investor expectations, there is this realisation that market hype – not just fundamental events – is an overwhelming driving force. Naturally, market participants are keen on profit maximisation, and are on a quest, narrowing down on what crypto to invest given the rich diversity.
However, from cryptocurrency market analysis, it is clear that some assets are more attractive than others. Case in point: Bitcoin (BTC). BTC is not only the world’s most valuable digital asset by market cap, but is also the most liquid. These properties, and endorsement from major regulators as a utility, means it is listed in most exchanges as a base currency, and is, therefore, the most dominant.
A simple crypto market overview shows that BTC’s market share stands at 67% from a market cap of $147 billion. Its average daily trading volume is $9.75 billion. Ethereum’s ETH comes second, with a market share of 8.8% while Ripple Lab’s XRP controls 5.53%.
Compared, BTC outperformed both XRP and ETH in USD terms. Trading at $8,500, BTC has completely reversed deep losses of Q4 2018. Given the traction of these big cap digital assets and the media attention they garner whenever there is a price revival, it could explain why big cap assets have considerably outperformed medium-sized altcoins as per an MVIS CryptoCompare Digital Assets 100 Index crypto market analysis.
The index is a market cap-weighted and tracks the performance of the top 100 digital assets or coins. Aside from Binance Coin (BNB), which soared to $30 before dropping to spot levels, ChainLink is up 268.15% year-to-date.
Here are the top 12 cryptocurrencies according to the index, as of October 9 2019:
On the flip side, periphery assets like Aeternity, Steem and Waltonchain are deep in red, and are the worst performers in the top 100, posting 79.6 per cent, 74.8 per cent and 70.2 per cent respectively on a year-to-date basis.
At the time of writing, digital assets in the Drugs and Healthcare subsector were up 9 per cent, outperforming cryptocurrencies with use cases in Education, Recruitment and Business platforms.
Factors that influence crypto market today
Cryptocurrencies, regardless of their consensus protocols and use cases, are a product of the digital society. Decentralised, fast, cheap and democratised, blockchain derivatives bear some unique characteristics that have drawn the attention of governments.
Because of decentralisation and distribution, cryptocurrencies are largely unregulated. And therein lies the major pain point. Because of this, some governments like China have resorted to banning cryptocurrency trading. India is also hostile to cryptocurrencies, and in the United States, the US SEC is aggressive, heavily punishing offenders.
Overly, the cryptocurrency market is influenced by the following factors:
Regulation
There are regulatory challenges thanks to the decentralised nature of the market. Country specific-laws are not effective. For successful implementation, countries must collaborate. In most cases, one country may be accommodative and another restrictive. And that is where there is an imbalance that blockchain businesses take advantage of.
For example, in a Kimchi Premium, a phenomenon when there are price disparities between different cryptocurrency exchanges, the demand for Bitcoin in South Korea created an opportunity for arbitrage which traders exploited for profit. Nonetheless, arbitrage opportunities persist.
Similarly, when regulators classify a project’s token/coin as a security or impose restrictive rules, the valuation of the affected project will tumble, adversely affecting the market.
Politics
The cryptocurrency market is sensitive to comments from political leaders and developments.
For example, back in September 2017, Chinese authorities bowed to political pressure, banning ICOs, cryptocurrency trading and consequently shutting down exchanges. The result was a pronounced capital outflow from China to open economies such as Japan, Singapore, and Malta where Binance, OkEx and Huobi have established bases.
In other countries, cryptocurrencies may not be banned but regulators take advantage of political statements to install more obstacles, preventing investors from rightfully investing in projects or trading in certain exchanges. Example, the US and South Korea clients are restricted and even excluded in most ICOs and IEOs.
Economics
Bitcoin and cryptocurrencies are inherently censorship-resistant due to node distribution. As such, they act as safe havens just like gold. A common observation is that citizens from countries with weak leadership, plagued by hyperinflation and corruption tend to store value in cryptocurrencies whose prices are influenced by supply demand and not poor monetary policies or sanctions.
In Venezuela, citizens are shunning bolivars and flocking to Dash, BTC, BCash and other altcoins. The same is happening in Iran and Zimbabwe and lately Argentina.
Top crypto to invest in fall 2019
From the above, and considering how nascent that market is, investors can choose any of these top cryptos to invest in fall 2019:
Bitcoin (BTC)
Bitcoin is the pioneer cryptocurrency, and as aforementioned, the most valuable, secure, widely adopted, and scarce. Dominating in market share, BTC usage is gaining traction as it was developed specifically to be a decentralised, censorship resistance electronic money.
Trade Bitcoin to US Dollar - BTC/USD CFD
According to the US SEC, Bitcoin is a utility and consequently acts as a base currency in most exchanges impacting altcoin valuation. Besides, the community trust the coin as a true cryptocurrency that has been tempered and truly tested since launch. Analysts project that the next halving could propel BTC prices higher.
Ethereum (ETH)
Ethereum co-founders are creating a distributed world computer.
ETH, the native currency, is an improvement of BTC and acts as a utility in the Ethereum ecosystem. Ethereum Foundation has an initiative in place to fast-track development in their bid to transit to a proof-of-stake system on time.
Analysts project that upon launch, ETH will rightly compete with BTC as a store of value and a reliable, secure and communally developed app and smart contracting platform.
Cardano (ADA)
Cardano is Ethereum’s competitor. The difference is that Cardano is peer-reviewed, creators are meticulous, fronting quality and security over development justifying their delays. Recently, they launched Shelly Testnet, and with a duo layer, IOHK and Cardano Foundation promise that the PoS platform would be more scalable, secure and decentralized. Cardano’s public addresses will be human readable with a fixed supply of 45 billion ADA.
Where to trade cryptocurrencies
Given their advantage over traditional assets, top cryptocurrencies to invest in are popular among traders. Given the volatility as the market matures, cryptocurrency trading tends to be profitable.
While you can buy digital assets like BTC from a cryptocurrency exchange, a trader can capitalise on the fluctuation of the underlying prices by trading a derivative product like a contract for difference (CFD).
In a CFD contract, the broker agrees to settle the difference in value between the opening and closing dates of the contract. Unlike in cryptocurrency exchanges, trading a crypto CFD means a position is held by a trading account in a platform, with an option of shorting-selling and margin trading. This could come in handy especially when hedging and simply speculating on asset prices.
You can trade cryptocurrency CFDs at Capital.com and enjoy the benefits of deep liquidity and tax-efficient trading. However, since CFDs trading is leveraged, both winnings and losses are magnified.
