Cryptocurrency markets have been inundated with bottom signals for many weeks, culminating with noted long-term losses in Bitcoin and Ethereum profitability. Bitcoin and Ethereum’s one-month, three-month, and six-month trajectories have all hit three-month lows, bringing the entire cryptocurrency market to a precipice. What do these bottom signals mean and what can be done to prevent further losses? Read on to find out.
What is a Bottom Signal?
A bottom signal is a market indicator that gauges the sentiment around a particular asset, usually stock or cryptocurrency. Currently, bottom signals on Bitcoin and Ethereum are at their lowest in the past six months. When combined with price drops, these signals can provide valuable insights into the viability of investing in these assets and the future of the broader cryptocurrency market.
Cryptocurrency Prices Drop to Three-Month Lows
The overall cryptocurrency market capitalization stands at $279 billion, down from its all-time high of $540 billion in December 2017. Bitcoin’s price has dropped to its lowest level in three months, currently trading at around $8,500, down from its mid-year highs of around $13,800. Ethereum also recently hit a three-month low, trading at around $420, down from highs of around $547 earlier in the year.
Ripple and Litecoin have seen similarly significant lows over the past few months. Ripple’s price has dropped to an all-time low of around $0.40, down from its peak of around $3.30 in early 2018. Litecoin has seen a somewhat less dramatic decrease, though its current price of around $111 is still at its three-month low.
Bottom Signal Conundrum
The current low bottom signals, combined with the recent price drops, have many wondering why they are happening and what it could mean for the cryptocurrency market going forward. Several hypotheses have been floated, but the most prominent one is that investors are shying away from investing in cryptocurrency due to regulatory and political uncertainty surrounding the future of blockchain technology.
Effect of Regulation on the Cryptocurrency Markets
The lack of widespread adoption of blockchain technology and cryptocurrency has led to a regulatory void from which industry participants and investors struggle to escape. Without legal clarity and oversight, investors have no way of accurately predicting the long-term viability of their investments.
This has led to a decrease in investment and a corresponding decrease in trading volume – both of which have a direct effect on crypto prices. Without the influx of money from mainstream markets, crypto prices remain stagnant and as a result, press down on the bottom signals.
Mitigating Risk and Building Positive Expectancies in the Cryptocurrency Market
In order to mitigate risk and build positive expectancies in the cryptocurrency market, industry participants need to establish a legitimate regulatory framework. Although regulations would certainly cause some near-term pain, they would also provide investors with greater confidence, clarity, and assurance that their investments are supported by legal and governmental oversight.
Currently, the US government is only beginning to explore the potential of cryptocurrency. We do know that the country’s regulations will likely be stricter than those of other countries, so it’s possible they could actually have a positive effect on the bottom signals.
The bottom signals associated with Bitcoin and Ethereum have been hitting three-month lows due to several factors, including regulatory uncertainty, lack of adoption, and decreased trading volume.
In the near term, there is little that can be done to increase the bottom signals. However, in the medium to long term, industry participants should focus on pushing for clarity and regulation that can provide investors with the assurance they need to make informed decisions. Regulations could also help to bring more money in from mainstream markets, increase trading volume, and boost the bottom signals. Only time will tell if it will be successful.
