Contributing Factors To The Downward Trend

Welcome back crypto enthusiasts, to the weekly instalments of the latest news, topics and worldwide updates from Magnet Capital.

As part of the feedback we received, we will be trialling a move to monthly reviews (second Tuesday of each month) they will consist of a coin/token spotlight, in-depth monthly topic and a strategic opinions piece. Our readers will still get a digest weekly of major price movements and top news headlines, small and direct to keep you informed.
 

This week’s hot topic - Contributing factors to the downward trend

US Taxes

Crypto asset holders may be innovators, but the large proportion of retail global investors didn’t take into account tax implications of their crypto investments. The first exchange to acknowledge their users didn’t take tax into consideration was Coinbase. They created a tool for US investors to calculate the tax they need to pay to the government once profits are realised back into USD.

 

G20

G20 leaders met in Argentina to discuss; The Future of Work, Infrastructure for Development and Sustainable Food Future - most importantly, on the list was two separate focus sessions on cryptocurrencies. 

In the lead up to the G20, many anticipated heavier sanctions, regulation and negative press coming from Financial Stability Board (FSB). However, Mark Carney President of the FSB released 3 statements;

1 - FSB initial assessment is that crypto assets do not yet pose a risk to global financial stability
2 - FSB is resisting calls to regulate Bitcoin
3 - FSB is pivoting to improve existing rules rather than create new ones for crypto assets

 

SEC sanctions

The SEC and Hong Kong securities regulator issued sanction and subpoenas to crypto assets that posed as securities. The sanctions imposed on the exchanges forcing them to de-list tokens that are in breach of securities violations. The remaining ICO’s and tokens that were issued subpoenas have two options, apply for the correct legal status and become a securities token or prove that you are not in violation - both of which are time consuming and costly.

 

ICO sell offs

ICO’s boomed through Q4 2017 and early Q1 2018 - Recently, investor expectation when an ICO finally hits the exchanges is a healthy return on their investment, as they have taken the risk to be first and sometimes escrowed. However, this has not been the case recently, with many ICO’s listing at less than their buy-in price.

 

It’s undeniable that ICO’s/Token Offerings have found an innovative way to raise funds, but for now, while the market is in recovery mode, expect below average returns for anything but the best projects.   

 

Mt Gox

Last week we lightly spoke about the Mt Gox legal team selling off the seized Bitcoins on the market, causing a dip every time the coins moved to an exchange. Mt Gox have denied claims they move the market. In reality, the daily volume is unaffected by the amount of coins they sell, the stigmatism that comes with the sell of the coins attracts attention in a negative way.   

 

Media

Despair sells more papers than adoption and positivity - The Bitcoin obituary count is up to 269 (https://99bitcoins.com/obituary-stats/) - the media fuelled frenzies from Hong Kong, Korea, China, India and the US, claiming bubbles, arrests, shutdowns and bans. Over the last two weeks once prices tanked and transaction volumes dropped - media coverage subsided. In the next media run, expect ‘Is Bitcoin back?’ and ‘Could we see Crypto at xx value’ articles to dominate.

 

Magnets Take

We have always welcomed regulation. It is a necessary step towards Government and institution adoption. What we and the majority of crypto leaders globally underestimated was the backlash from the public regarding sanctions, shutdowns and subpoenas. Retail investors who are over exposed in crypto are quick to conclude that governments will come between them and their investments and when the market starts to dip they are quick to liquidate.

The positive outcome of G20 saw a US$1000+ increase to the BTC price and a good bounce for the market, we are not out of the water yet - we need to break some key price resistance thresholds for Bitcoin at US$8,600, US$9,200, US$10,000, US$10,900 and $11,300 before we are back on track.

Magnet is expecting increased positive sentiment in the market leading up to the Consensus conference in May which historically has caused positive price movements as the biggest Crypto conference of the year (4,500 attendees). There is still a strong opportunity to invest in great ICO projects.

 

Bites

 

Tim Draper - Bitcoins biggest fan and permabull Tim Draper has quoted Bitcoins price to be worth more than US$100,000 - he also quoted in 2014 - BTC to be at US$10,000 in 4 years, he was right on that one…

 

ICO barriers to entry - The biggest exchanges hold the keys to market volume, they control which coins are able to list on the platform, which are removed, which suspend trading and what will never make it - the entry requirements are strict, and the price… ranging from US$50,000 for Tier 2 to US$1M for Binance. Coinbase? Priceless.

 

 

Adoption

  1. The US Federal Trade Commission has taken proactive steps and set up a working group to examine how cryptocurrencies and blockchain technology will impact their operations and objectives.

  2. IBM have revealed that the world’s smallest computer, smaller that a grain of salt, will utilise blockchain technology and soon be embedded into everyday devices. This will help ensure authenticity of products from their origin point to their consumer.

  3. Northern Trust, one of the largest custodian banks in the US, is preparing to roll out its new blockchain based platform for Private Equity Funds. This would allow auditors to gain access to real time data.

  4. Donald Trump has signed an executive order, blocking any US transactions in the petro (cryptocurrency coin), the Venezuelan state sponsored cryptocurrency. The currency is widely regarded by politicians as a mechanism for Venezuela to circumnavigate international sanctions on the country.

  5. Bladetec, a British IT Hardware supplier, is planning to build the largest Bitcoin mining farm in the UK. They are expecting to raise £10m to fund the farm which they estimate will mine ~1,280 Bitcoin in the 3 years it would operate.

     

     

  

The Market

  • The market fell again this week on the back of more negative media attention, this time with Google announcing that it would ban all cryptocurrency advertisements and speculation that twitter will follow in the coming weeks. All cryptos received a little boost in the last 24hrs off the back of comments from the G20 meeting, stating that crypto did not currently raise a threat to the stability of the global economy and as such regulation would not be discussed.

  • Ether, the Ethereum currency, was one of the worst performers of the week. One potential contributing factor was the sale of 50,000 Ether tokens raised by the EOS crowdsale.

  • For the last 2 months Bitcoin has generally been bouncing between US$8,000 and US$12,000, with other crypto assets generally mimicking Bitcoins movements. The long term trend remains bearish, but a daily close above US$11,300 could signal the beginning of a new bull run.

Egor Sidelska