The cryptocurrency market is in complete turmoil. Bitcoin analysts and “experts” are divided on what is driving the market’s volatility. And depending on what article you read or who you talk to, you’ll get a different opinion. One expert (Phillip Nunn) claims that Bitcoin’s price will reach $60,000 as regulation and institutional investments replace speculation and public purchases. Billionaire investor Mike Novogratz claims the market as whole will grow to $20 trillion (starting midway 2018) when the ecosystem as a whole stabilizes.
On the other hand, critics continue to predict that the Bitcoin bubble will pop at anytime or eventually. The reality is that the Bitcoin market is not a free market; this means that it’s unpredictability cannot be overstated. And worse, there’s growing evidence to suggest that just like fiat, the crypto market is controlled, manipulated, and influenced by special interest groups.
Rumors of an “Invisible hand” controlling Bitcoins have taken many forms. From whales, to wealthy families like the Rothchilds or Rockefeller, to shadow cartels who use media negativity to control the price of Bitcoin. All these theories gave way to a formal study released this week by two professors of the University of Texas. Their research claims that the Hong Kong based exchange Bitfinex artificially inflated the price of Bitcoin by using the Tether coin.
In essence, Bitfinex bought up large quantities of Tether and distributed it to other exchanges that carry the coin. As more Tether entered the market, it created a higher influx of money that drove the market up. The synthetic activity created interest that also drove prices up. However, when Bitfinex ended its support for Tether, market prices dropped. This pattern was observed everytime Bitcoin prices rose last year.
Tether and Bitfinex are no strangers to controversy. In fact, Tether’ s liquidity has always been suspect and its $675 million reserve questioned. But if the data revealed on this study holds true, the entire market future will be in question and all investments will be lost. But however convincing this analysis sounds, a bigger threat to the future of Cryptocurrencies is approaching.
CBOE’s President Chris Concannon announced that the SEC ruling Ethereum not a security paved the way for ETH futures. These news couldn’t come at a worse time; it is generally agreed that futures is one of the factors contributing to the steady decline in Bitcoin’s prices. Therefore, with futures contract tugging at the two top crypto currencies in the near future, all market prices will predictably suffer. This proposes the dim possibility of the prolongation of the bear market for years to come. This will give Bitcoin’s opponents the time they need to counter cryptocurrencies or for its supporters to abandon their interest.
In fact, a major factor affecting the future of Bitcoin is low interest in Cryptocurrencies altogether. This is due in part to the lack of understanding of the technolgy. The users are not there, the buyers are not there, therefore, overall interest is low. Mr. Novogratz contends that interest will rise once a major “custodian” (a prominent bank or hedge fund) takes ownership of the market and it’s assets this restoring investor’s confidence.
In summary, there is a strong case for both arguments; the rise and fall of Bitcoin. Despite the price swings, investment into crypto is strong. However, the lack of stability and added uncertainty will make it difficult to believe that the crypto marketcap will grow 20 times the size it was at its peak. In the end, as both forces act on the market, a draw, resulting in little to no action is a more realistic expectation, at least in the near future.