Jim Duffy comment: Digital assets now face a very real bear market

The new bear market in the cryptocurrency world has cost many armchair investors a small fortune, says Duffy. Picture: Contributed
The new bear market in the cryptocurrency world has cost many armchair investors a small fortune, says Duffy. Picture: Contributed
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There appears to be a sense of impending doom in the global economy. As Jaguar Land Rover announces it will axe up to 5,000 job and retailers line up to demand rent cuts from landlords, businesses across the globe are preparing for the bear market. There is a slim down mentality pervading boardrooms as tech stocks slide and volatility in the markets causes violent sinusoidal waves. This lack of confidence and nervousness is not just taking place in the regulated markets; the cryptocurrency markets are also subject to dramatic swings.

Exactly one year ago this week, the cryptocurrency markets were on fire. The thirst to buy bitcoin, ethereum, ripple and litecoin was insatiable in the US, Europe and the Far East. New exchanges such as Binance and Coinbase could not keep up with the demand for folks logging on and attempting to get their pounds and pence into the crypto system. And it wasn’t easy.

Having survived the trauma of transferring hard currency from a UK bank account to a crypto wallet – with all the bank charges that attracted – many new “investors” selected the coin or token of their choice and jumped on the crypto bandwagon. Myself included. The hysteria and fear of missing out led many to put in more than they could afford. After all, they could see that bitcoin, the main mover and crypto anchor, was destined for the moon. The phrase “to the moon” was used everywhere on crypto websites, chatrooms and apps. Bitcoin ascended to a staggering $19,783. In January 2017, it had been sitting at around $750, so the train had definitely left the station. Or, in crypto speak, the moonshot was set to go.

Some commentators believed bitcoin would rise to $50,000. With such a small supply of the “coin” in circulation it would become the gold bullion of the cryptocurrency market. Other coins, such as ethereum, quickly established themselves as contenders and also rose, topping out at $1,417 in January 2018. This weekend, bitcoin was priced at $3,210, while ethereum was at $85. The new bear market in the cryptocurrency world has cost many armchair investors a small fortune. The “buy in the dip” strategies of the past are not working as the values keep falling.

So, crypto investors are looking elsewhere for shelter and the hope of some gains in the future. Buying a $19,000 coin a year ago to see it plummet to just over three thousand bucks is a sore one in anyone’s language. Perhaps looking for more value in the market as opposed to betting blind is becoming the norm.

As Initial Coin Offerings subside, crypto analysts are now more focused on the utility of a coin. What can the coin, and the company that owns it, actually do? Can it attract customers, developers and partners? Does it have a strategy? I think you can see here that the reality of cryptocurrency has kicked in. No longer are chatrooms filled with “pump and dump” chatter. They are now looking at the fundamentals of the business that in fact and in effect is the coin.

I would suggest that this is an exciting time for crypto, albeit my crypto wallet is sagging a little. The opportunity to seek out better informed information on crypto companies and what they aim to do in the next three to five years is more visible and, indeed, demanded. Blockchain and how useful it truly is will be the foundations upon which a crypto company is assessed. And the language is changing, from cryptocurrency to crypto company. As beneath all the top ten crypto companies there has to be a business plan that has legs. Otherwise no-one is going to invest.

I’m still sticking doggedly to my first crypto company pick that, from day one, I felt had a vision, a young entrepreneurial leader who was being well mentored and enough cash in the bank to see it through. Certainly, with bitcoin sliding, its value has dropped also. But, I’m holding onto this one for dear life as I check its progress each month.

The cryptocurrency market now feels real.

- Jim Duffy MBE, Create Special