The crypto market is having arguably the most positive month in its nine-year history. Yet, the price of major cryptocurrencies like Bitcoin and Ethereum have struggled to reflect optimistic developments in the industry.
13 days into September and the crypto market has seen Gemini introduce the market’s first fully audited and licensed stablecoin, EU commission acknowledge cryptocurrencies as an asset class, Nasdaq start to build analytics tools for crypto, and Citigroup begin to explore crypto custody.
Just watch price catch up to reality inevitably. It's the most beautiful thing to watch happening to you when you know it ahead of time (and acted upon it accordingly). Not trading advice, just saying… https://t.co/BfYf2rIzWG
— CZ Binance ??? (@cz_binance) September 11, 2018
Still, in terms of valuation, the crypto market is approaching its year low, despite the solid corrective rally the market recorded on September 13, supported by the 10 percent increase in the price of Ethereum.
When Will it Start to Show in Price?
In July, Balaji Srinivasan, the chief technical officer (CTO) at Coinbase, the world’s largest crypto brokerage and wallet platform, said at the TechCrunch Sessions: Blockchain held in Zug that historically, the cryptocurrency sector has gone through the cycle of bubble-crash-build-rally.
In 2010, 2012, 2014, and 2018, Bitcoin along with the rest of the cryptocurrency market suffered 80+ percent corrections. Each time, the market recovered beyond its previous all-time high, shrugging of criticisms from analysts in the broader finance sector that the cryptocurrencies will cease to exist.
The factor behind the successful mid to long-term rallies of the cryptocurrency sector subsequent to major corrections has consistently been the ability of the industry which includes developers, businesses, investors, and users, to prepare for the next phase of the market by preparing necessarily tools to support it.
“The reason this thing [cryptocurrencies] really had legs was after 2011 when there was a bubble and it went up, and it came down, and it didn’t go to zero. It kind of stabilized and kept coming back up. Around that time was basically when I said ‘okay, this is going to stick around, it’s got legs, it’s not going to zero.’ That was kind of a buidl year. We have this kind of bubble-crash-build phases in crypto, and that is really when i start to get involved,” said Srinivasan.
In 2017, when the price of Bitcoin reached $19,500 in the global market and $24,000 in South Korea, there were no custody solutions to facilitate the demand from institutional investors. Hence, even if institutions planned to allocate large chunks of capital into the asset class, they could not do it due to the lack of trusted custodianship.
Over the past several months, Coinbase has released the first custody solution in the cryptocurrency sector. Goldman Sachs and Citigroup have disclosed their plans to follow, seeing solid demand from the market.
More to that, as NewsBTC reported, the EU, the government body that oversees most of Europe, has said that cryptocurrencies as an asset class is “here to say,” implying that practical regulatory frameworks will need to be established to grow the industry.
For many years, Europe has fallen behind the US, Japan, and South Korea, three largest cryptocurrency markets in the world, due to the lack of regulatory clarity.
Price Will Reflect in the Next Rally
While it may sound strikingly obvious, positive developments will fuel the next mid-term rally. The difference between the correction of the cryptocurrency market in 2018 and previous years is that the industry itself is extremely positive and optimistic, seeing global finance become integrated to crypto finance, as ShapeShift CEO Erik Voorhees noted.