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Crypto markets hit 2018’s lowest point yesterday with a total market cap of ~$230 billion.
The steady decline over the last 9 months is coming off Bitcoin’s all-time high of $19,700 in December. Traditional markets rarely see ~70% price drawdowns, but this hasn’t been uncommon in the short history of cryptocurrencies.
Here are important data points since January 2012:
Bitcoin has experienced 13 total times when the price dropped more than 30%.
Bitcoin has experienced 8 separate times when the price dropped between 30-50%.
Bitcoin has experienced 3 separate times when the price dropped more than 50%.
Bitcoin had the worst crash in a single week when it dropped 83% during a three day period between April 10th and April 12th in 2012.
Bitcoin dropped 87% between November 30, 2013 and January 14, 2015. While this was the largest Bitcoin crash to date, it took 411 days to go from peak to trough.
The 70% Bitcoin price correction that has occurred over the last 9 months is now officially the 3rd largest drawdown in Bitcoin history.
The legendary Warren Buffett summarizes it best when he says, “Be fearful when others are greedy and greedy when others are fearful.”
I don’t pretend to know when the bear market will be over, but there are a few things that keep me extremely bullish during these less exciting times:
Some of the world’s most talented and successful people continue to join the crypto industry. Many of these people are less interested in speculation, so they are focused on building products and technology that can be used by millions of people.
Capital continues to pour into the industry. Investors, both institutional and retail, are supporting efforts across the ecosystem. They are allocating funds to infrastructure, consumer and enterprise products, and liquid tokens (currencies, utilities & securities).
We continue to experience “higher lows.” Every time the market grows and then shrinks, the new bottom of the market is at a higher market cap than the previous bottom.
Many smart people I know in the technology industry have told me some version of, “follow the money and follow the talent.” There is quite a bit of truth in the belief that innovation and value closely follow where talent and capital flows.
In fact, we have seen many of the most valuable technology companies built during bearish environments. While anecdotal, both Uber and Airbnb were built post-financial crisis and Facebook was built post-dot com crash. This doesn’t guarantee that future multi-billion dollar companies are going to be started this year, but I wouldn’t be surprised.
Bear markets get rid of the tourists, so the talent can focus.
Bitcoin, Ethereum, and more plunge: Bitcoin and other cryptocurrencies took steep dives in early trading Wednesday, with many digital currencies losing more than 10% of their value. The declines seem, in part, a reaction to the news the SEC has delayed its decision on a proposed bitcoin exchange-traded fund. The SEC had originally said it would announce its decision by Aug. 10. Now, it says, the announcement will come on Sept. 30. Read more.
3 questions for Coinbase alum Nick Tomaino: Cryptocurrency markets are in a slump and people are discouraged. But not Nick Tomaino. The longtime Coinbase employee, who now runs a crypto venture fund backed by big name investors Mark Cuban and Marc Andreesen, thinks things are looking up. It’s been a year since Tomaino launched the $26 million fund, called 1confirmation, and he says its investments in ten ventures have so far notched year-over-year returns of 40%. Read more.
Tezos ICO class action looms after motion to dismiss denied: A federal court judge in California has blocked a move that sought to dismiss a class action lawsuit alleging that the ICO conducted by the Tezos Foundation violated securities laws in the U.S. The decision came Tuesday, as District Judge Richard Seeborg denied the motion filed by the Tezos Foundation and the cryptocurrency's founding couple Arthur and Kathleen Brietman, as well as their U.S.-based company Dynamic Ledger Solutions. Read more.
Microsoft introduces Ethereum proof-of-authority algorithm on Azure: Microsoft’s cloud platform Azure has introduced a proof-of-authority algorithm on its Ethereum blockchain product. The new Ethereum network algorithm will reportedly allow a “more efficient” way of building decentralized applications (DApps) for private or consortium networks, where “all consensus participants are known and reputable.” Read more.
Intuit scores patent for processing Bitcoin payments via text messages: California-based business and financial software company Intuit has been awarded a patent for processing bitcoin payments via text message. The patent details how a system of virtual accounts could enable two users to transfer funds using mobile phones. Read more.
ShapeShift acquires tool that quickly swaps Bitcoin for other crypto: ShapeShift has acquired a startup that developed a tool for exchanging cryptocurrencies more efficiently. The company said that it acquired the Texas-based Bitfract after it made the tool – allowing for the exchange of bitcoin for "dozens of digital assets in a single transaction" using the company's API. The idea is that the tool makes it easier for crypto-buyers to switch up their portfolio without having to execute numerous transactions. Read more.
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Nothing in this email is intended to serve as financial advice. Do your own research.