Most of 2018 had Crypto investors worried that they would not see gains again and many investors left the space. News article after news article had painted a bad picture of the Crypto space, and even calling Blockchain an “overhyped” technology. At the beginning of the year many investors and traders were excited that it would all be temporary and a bull run would soon arrive. Although some Bull Traps and head fakes took place, that never did happen. I remember attending the famed Consensus conference in New York City and it was packed to the gills. Attendees were everywhere, and “FOMO” (Fear of Missing Out) seemed to prevail. Towards the end of the conference I realized most of the people I had networked with were not really investors but founders, funds, exchange owners, social media influencers, and other characters. I began to question why there were not so many investors and reflect on this question to myself.
The Bleeding Never Stopped
The ICO space was a massive one in 2017. Billions upon Billions of dollars were raised for peoples ideas, without working products, without proper leadership teams, without experience other than having a fancy college degree from MIT as a reference point for some. Some of my own personal friends were pioneers in Silicon Valley developing Apps for the iPhone when it was new, and made millions, some Billions. They knew that applications were the future and began to build. These applications had a real use case and were valuable to society in general. When consulting with one of these friends, he told me he felt that most of the Blockchain arena was filled with bad actors, people who intend to build nothing except marketing hype. Throughout 2018, many of the ICOs that were released to trade dropped way below ICO price, angering all of their investors with the exception of a few true believers. “Buy The Dip” became an exhausted phrase, as the dip went below the dip and did not see any sort of gain.
FUD Dominated The Crypto Arena & Blockchain Questioned
Blockchain is a revolutionary technological idea which can create absolute truth in records. This is valuable for just about every industry in existence. The only apparent threat to Blockchain would be what is called “Quantum Computing” and although possible, humanity is far from being able to achieve it. Both the United States and China have invested Billions of dollars to research Quantum Computing. Cryptocurrencies, while still not adopted by mainstream are advancing, but in 2017 many speculators and traders decided to invest in “Alt Coins” (Alternative Coins/Tokens) which saw massive spikes in value earlier in 2018 and then dropped in value significantly. One good example was “ICON” (ICX) which is a Korean Blockchain protocol. The ICO price was .12 Cents and it went to nearly $12. Many who invested into this became Millionaires in just a few months if they had cashed out their winnings. Those who held (HODL) ended up getting burned bad as the price went back to around ICO price.
People began asking questions about these Tokens, why they were valued so high, other than market making and fake pumps. Traders became more cynical and began to question whether or not they were all scams. Teams of 3-4 people were raising millions and millions of dollars in just a few minutes, and it became apparent that these people did not intend to build anything and just raise a bunch of money for an idea and a good well thought out White Paper. The Crypto community, is made up of a certain niche of people who were interested in Bitcoin tech early on. This is a small niche, but highly influential. Some of these people are found across Twitter, and underground trader communities. Some of the leadership in these groups began to really grill projects and ask hard questions, referring to Alt Coins as “Shitcoins”.
Human emotion is what TA (Technical Analysis) is all about. Charting the behavior of traders to make decisions on how to proceed with a trade. This emotion was magnified in 2018 as FUD (Fear Uncertainty Doubt) was so widespread, people began giving up and dumping what investments they had left, including Bitcoin. Attacks on social media took place and all ICOs were perceived as scam artists.
Scam Artists, Hackers & Regulations
Another factor which contributed to the bear market was the rampant scamming that took place. The community began to prey on each other through Twitter, Social Media channels, and some brazen enough to perform these in person. Exchanges had also faced vulnerabilities, founders of ICO projects were arrested for fraud and faced jail time and fines. Although the technology has been incredibly fascinating to study, in my opinion most of the Crypto community became cynics about new Tokens and most became “Bitcoin Maximalist” proclaiming Bitcoin to be the only true Cryptocurrency.
What was also uncertain were the regulations in various jurisdictions that had not been established or made clear. Those in regulatory bodies have been trying to understand the Blockchain space, use cases, and how the technology even works. This has been a very slow process and caused a slow down in the markets. If you really take a hard look at Bitcoin, it allows people to be their own bank so to speak. What this simply means is that Bitcoin is competition to banks if that comes to fruition. Banks earn money from their customers, and if everyone begins adopting Bitcoin, that is a direct threat. Can Bitcoin and banks co-exist? Value has been exchanged in various ways since the beginning of existence. Sea shells were once used as a form of currency. In my view, this is the advancement of human trade, it is pretty amazing.
Another event which contributed to the bear market were social media influencers being questioned for “Shilling” Tokens and being paid to do so. This is classic affiliate marketing and this is how the world operates, through sponsorships, partnerships and various affiliations. When this became more apparent investors became angry that they had been duped into believing their tokens were an investment vehicle when they were being used to pump the price of the Token.
Crypto Community Is Trust Based
In my honest opinion, we are a very long way from adoption. Yes, Bakkt will be launching a Nasdaq powered Crypto platform which will bring in more mainstream adoption eventually, ads like the recent ones from Gemini will be placed on New York City subways and billboards, people will become more aware of Bitcoin and Crypto and the sentiment will continue to grow. As of now, trust needs to be put in place for the masses to feel comfortable in this new frontier. As of today, it is still not easy to manage Cryptocurrencies, wallets have advanced features that have a learning curve, most people do not want to hold such responsibility to not lose their private keys or learn how not to lose them. People want things to be very easy. I do see these innovations coming and they eventually will happen.
When we begin to see Bitcoin acceptance, more adoption will come. The Lightning Network is an example of a piece of technology meant to improve the speed of Bitcoin transactions. If this is secured and used by convenience stores such as 7-11, then I can see Bitcoin becoming incredibly valuable down the line. Right now trust needs to be built for the masses to enter this arena and feel comfortable enough and confident enough to hold their own Keys. The Crypto community has been very insular in my opinion and I will go as far as saying an elitist club. This needs to change in order for this tech to advance and change the world.