Weekly Roundup: End of the Year Edition
Stocks were down but bitcoin was up over the last week – some 18% as of the writing of this article. Is the bottom of the year-long bear market for crypto finally in? Some tend to think so, as record high trading volume flooded the markets during the past 72 hours, perhaps acting as a Christmas gift for frazzled HODLers everywhere. In this week’s special Christmas Edition of the Weekly Roundup, we recount just how wrong the “wisdom of the crowd” was when it came to predicting BTC prices for the end of the year, review the lone winner in the top 100 coins by market cap, tell you those that managed to beat BTC’s dismal performance (there weren’t many), and go over some of the biggest losers – one of which is potentially responsible for dragging the rest of the market down with it, and which you probably won’t be surprised to discover.
Financial Media Experts Missed Big in 2018
During the first half of 2018, talking head analysts featured on popular financial media outlets like CNBC were quite optimistic about crypto’s continued blast beyond the moon and into the deeper regions of the solar system. Never mind the fact that bitcoin was already up thousands of percent over the last year — cryptocurrency would be taking the world by storm, and the blockchain revolution was going full steam ahead. What happened next, of course, was anything but, as the total market capitalization value of all cryptocurrencies currently stands at a paltry 23% of its former self at the beginning of the year.
Bitcoin is currently down 72% from its January 1st, 2018, with most other altcoins down much, much further. However, this of course does not mean that the cryptocurrency movement has been a failure by any stretch of imagination, but was caught up in a bubble that had to pop sooner or later. For example, despite the tremendous downward move that characterized this year the price of BTC is still up 366% over the last 2 years, making it a far better investment than pretty much any stock or traditional asset class over the same period.
For some reason, people still expected more out of bitcoin; perhaps out of greed, perhaps out of other financial motivations, or perhaps because they genuinely believed its price would keep going upward forever. In the long-term, it still might, but in the shorter term, there were some very wrong, far too optimistic opinions being shouted at viewers daily on financial media outlets. In June, Coin Clarity published an article on four year-end BTC price predictions that we said we would keep track of and report back to how close to reality each one was at the end of the year. Whether surprisingly or unsurprisingly, they were all completely wrong, and we’ll analyze them one by one now.
Prediction #1: $100 – Joseph Stiglitz (off by -96.7%). The only bear in our group, World Bank economist Stiglitz warned about the pitfalls of bitcoin in a January interview with Bloomberg:
“My feeling is when you regulate it so you couldn’t engage in money laundering and all these other (crimes), there will be no demand for bitcoin… By regulating the abuses, you are going to regulate it out of existence. It exists because of the abuses.”
Ouch. Harsh words for the mother of all cryptocurrencies. Well, Stiglitz turned out to be even more wrong than those who had guessed the complete opposite, and to its credit, bitcoin didn’t come close to dying in 2018. Some analysts are hailing this fact as an accomplishment in itself, while others are still pessimistic, likening it to a “digital lottery ticket for a dystopian future.” Ideally, bitcoin will continue to grow and exist, finding a legitimate niche in the economy without its success being dependent on its utility for fraudulent or otherwise devious activity.
Prediction #2: $20,000 – $25,000 – Tom Lee (off by +77.5% – +82%). In July, Tom Lee of Fundstrat Global Advisors told CNBC,
“Bitcoin has historically traded at 2.5 times its mining costs. It’s not out of the question that it could be over $20,000 by the end of the year at fair value.”
Well, bitcoin only continued to fall in value after that point, and by November he had reduced his estimate to (what was still a very generous) $15,000. Most recently, he had to give another official revision for the record, saying a couple weeks ago:
“Because of the inherent volatility in crypto, we will cease to provide any timeframes for the realization of fair value.”
Whoops. Will 3 wildly inaccurate price forecasts prevent Lee from sitting in front of CNBC’s camera crews again in the future? We can only hope so, but we can’t provide any timeframes for this realization.
Prediction #3: $50,000 – Arthur Hayes (off by +90%). Hayes is the CEO of the highly popular exchange BitMEX, which allows traders extreme leveraging opportunities not normally offered by more traditional bitcoin exchanges. In late June, he told CNBC’s Fast Money:
“… We’re one positive regulatory decision away; (such as) an ETF approved by the SEC, to climbing through $20,000 and even to $50,000 by the end of the year.”
To be fair to Hayes, the “positive regulatory decision” contingency for his prediction never came to fruition, and earlier in the same interview Hayes had mentioned that BTC could see $3,000 – $5,000 before continuing its upward trajectory, which did indeed happen.
Prediction #4: $60,000 – Julian Hosp (off by +92.5%). Hosp, president and co-founder of crypto wallet and card start-up company TenX also voiced his prediction on CNBC in early July, sounding supremely confident at the time:
“I predicted for 2018, we’re going to see $5,000 and $60,000. So $5,000, we pretty much hit it, so let’s see if we can do the $60,000. I’m still quite confident.”
In a recent tweet Hosp seems to have cut back his estimate some 15 fold but is still highly optimistic about the future of bitcoin.
However embarrassing these proclamations turned out to be, it is all but certain a fresh batch of talking heads will be at it again next year, touting extraordinary highs (or lows) in the face of price movement that suggests otherwise, while the old batch can only promise to try to do better.
The Best and The Worst Coins of the Year
Interestingly, there was only 1 coin currently in the top 25 by market cap that managed to end the year (thus far) with positive returns, and that was Binance Coin (BNB), with a 27% gain since January 1st, 2018. As of the writing of this article, BNB was ranked #15 in the list of coins by market cap, worth a whopping $844 million, making it by far the most successful Ethereum token ever launched. Even in a down market, mega exchange Binance had a great year, recording record revenue and on track to surpass $1 billion in profits by the end of the year.
The reason behind Binance’s success? Besides the fact that they make money on every trade regardless if the market is up or down, they have a highly successful business model for an exchange: a user-friendly interface, fast and thorough support team, accessibility in over 90 countries, minimal membership requirements, and on top of all of this, they have never been victims of a major hacking (earlier in the year they offered a $250k reward in the form of BNB for help finding and convicting an attempted hacker).
The uses of BNB itself are three-fold: holders can use it to activate discounts on trading fees, it can be loaded onto a Visa debit card through their partnership with Monaco, and it can be used to purchase digital goods from the Uplive platform. Although the token does not allow its holders to do anything like retain a percentage of profits from their company, Binance does have plans to buy back up to half of all BNB token in circulation and “burn” them, thus making the token scarcer and potentially more valuable.
Only 4 other coins in the top 100 managed to fare better than BTC’s 72% loss this year, and those were Maker (MKR) – down 49%, Aeternity (AE) – down 61%, Ripple (XRP) – down 62%, and EOS (EOS) – down 64%.
The biggest loser of the year in the top 100 – both literally and figuratively – was Bitcoin Cash (BCH), currently down 93% since the beginning of the year. The Roger Ver-led fork of BTC was off to a decent start in 2018 after parting ways with BTC in the third quarter of 2017. After failing to find a niche in the world’s crypto user base and miring itself in a tireless struggle for legitimacy which it largely lost, Bitcoin Cash found a new opponent to battle against in November: itself.
In August, the Bitcoin Cash main development team (known as Bitcoin ABC) announced that it had plans to conduct a hard fork in order to expand its capabilities as a cryptocurrency. A well-funded and vocal opposition soon mounted in response (known as Bitcoin SV), vowing to fight a long and bloody “hash war” for dominance of the BCH trading symbol. On November 15th, the Bitcoin Cash “Civil War” commenced, providing a great deal of drama and entertainment, which quickly turned to consternation for the general crypto community as it soon became apparent that the two “generals” from each faction were dragging down the entire market in their fight for supremacy.
What perhaps began as a legitimate contention was soon reduced to a schoolyard squabble over who was the rightful owner of an expensive toy. Serious investors lost confidence in the crypto market altogether, and the prices of both outcomes of the fork (BCH – which retained the symbol, and BSV) tanked. Even with a recent pump that saw BCH gain 40% in a matter of days, both coins combined are still worth significantly less than the price of 1 BCH pre-fork. BCH will likely spend months repairing its reputation as a result, and BSV will potentially need years to build theirs.
All in all, it was a pretty down year for the whole of crypto (with Binance Coin being the lone exception).
Also in the News
- One thing that has continued to grow in popular in the face of the bear market is the Bitcoin Lightning Network, which is now up to a 500 BTC capacity and consists of over 2,000 active channels. For those who didn’t know, the Lightning Network is an off-chain scaling solution for bitcoin that allows participants to process payments without actually having to immediately relay them to the blockchain.
- Former US congressman and presidential candidate, Ron Paul, is criticizing the Federal Reserve again after it recently raised interest rates by a quarter of a point. One of bitcoin’s most famous politician fans, Paul called for the Fed’s elimination, reiterating his long-standing belief that free market dynamics should guide interest rates.
- Social media giant Facebook is reported to be developing a cryptocurrency for users of messaging service WhatsApp, according to Bloomberg in an article published on December 20th. It is believed that the coin will be used to facilitate the app’s money transfers and will initially target remittances market in India. Mentioning sources involved in the project, Bloomberg claims that Facebook is developing a new type of stablecoin. Facebook is still ironing out the kinks of its deployment, including deciding which asset will back and peg the stablecoin.
- Bitcoin is going boldly where it has never gone before: outer space. More specifically, the entirety of the bitcoin blockchain is now being broadcast via 5 different satellites to all major land masses (with the exception of Greenland and Antarctica). This means that, thanks to bitcoin technologists at Blockstream, bitcoin users will no longer require the internet in order to send and receive BTC transactions and can send messages to one another from remote regions of the globe. The blockchain is updated continuously and runs 24/7, making the occasion one giant step for bitcoin.
From all of us at Coin Clarity, Merry Christmas and Happy Holidays to all!