Crypto Recovery or the Beginning of the End

Bitcoin looks to have averted a crisis for now, with Bitcoin rising 2.55% to an $11,485 close on Thursday, with the sub-$10,000 levels of Wednesday behind for now.

The markets certainly responded in panic to the South Korean government’s threats of shutting down the crypto exchanges, but unlike the dot.com era, cryptocurrencies didn’t get wiped out.

For now the general sense is that the cryptoworld can continue, even if the South Korean government does follow through with its threat, though the chances of all of the crypto exchanges being shut down may have eased somewhat The government’s first step will be to review the exchanges and their policies on KYC, money laundering and if they have addressed the issue of anonymity. There’s plenty of incentive for the exchanges to meet the basic requirements of the regulators. After all, the alternative would be closure.

Going into the New Year, there were calls of Bitcoin hitting $40,000 by the end of the year, while some continued to call the cryptomarket a bubble ready to burst.

The takeaway from this week seems to favour neither camp. For Bitcoin to rally through to $40,000 by the end of the year, Bitcoin’s issues will need to be addressed. For now, there is talk of some enhancements by the core development team that could provide some transaction speed improvements, but with Bitcoin’s competition far more favourable on speed and transaction fees, more is going to be needed.

So, with the bubble firmly intact, it’s onwards and upwards for now. For the crypto bulls, the rebounds are likely to cement the cryptos and how the cryptocurrencies progress will gradually become more aligned with the success of the blockchain technologies that each have to offer.

We’re not there yet and more turbulence is likely to be on the horizon until the market matures and investors become more attuned to the key drivers.

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At the time of writing, Bitcoin was up 4.84% to $11,792.15 in what has been a day of tighter ranges, with Bitcoin’s intraday low of $11,054.84 hit at the start of the day.

There’s been little bad press through the day to shock the markets, which is good news going into the weekend, though for the rest of the day the futures market could be the stumbling block, with the Cboe’s February contract down $15 to $11,750, marginally lower than Bitcoin’s current value.

The markets may have had a lesson in the week on the futures market and the fact that some degree of divergence is to be expected, as is the case with the more mature asset classes.

We’ve seen the futures market pin back the crypto’s, but have very little influence on the upside and investors may need to pay less attention to the futures markets for direction, particularly when considering the fact that the investors on the futures markets are newer to the cryptocurrency game.

Bitcoin is here to stay and the only immediate threat to Bitcoin remains Bitcoin Cash. The markets are certainly taking a closer look, with Bitcoin Cash up 7.39% to $1,810 at the time of writing.

These returns may not be as impressive as historical rebounds, but when comparing today’s gains to the more traditional asset classes, recoveries from more than 50% losses would have taken a far shallower path to current levels.

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