DataTrek Research: cryptocurrencies are destined to climb back up
DataTrek Research: cryptocurrencies are destined to climb back up

DataTrek Research: cryptocurrencies are destined to climb back up

By Daniele Chicca - 30 Aug 2018

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It’s no secret that 2018 was a year to be forgotten for cryptocurrencies and DataTrek Research agrees in its last report.

Bitcoin’s increase of 20% from the lows of August 14, however, bodes well for the rest of the year, especially if you consider that interest has never vanished completely and that crypto wallets have grown in number in the last two months.

Nicholas Colas, Co-founder of DataTrek Research who has been following and analyzing the cryptocurrency industry from his New York offices for five years, is of the opinion that despite all the losses incurred, “the industry continues to grow” in all respects.

Since the beginning of the year, investors have placed 6.7 billion dollars in tokens issued through fundraising operations (ICOs). In May and June, well beyond the bubble period, ICOs attracted $800 million per month in investments.

The situation came to a standstill in August (with inflows of almost $200 million), but when analysed in context, the figures are positive: “the numbers are absolutely remarkable given the length and breadth of the bearish market phase for the cryptocurrency sector“.

High interest prevails, even in the worst moments

The sell-off of recent months has not spared any currency. Bitcoin is down 48% this year, Ethereum 60%, Ripple 85%, Bitcoin Cash 78% and EOS 36%.

But even in the most difficult times, digital currencies, as we have seen, have attracted the interest of investors all over the world.

Colas has listed the three most important factors to keep in mind if you want to try to hypothesize where prices are headed and identify what will be the future of the crypto universe.

  • First of all, the fact that the market capitalization of bitcoin is still high: at 122 billion dollars it is higher than that of Goldman Sachs, Ford and General Motors put together.
  • Secondly, the fact that the total capitalisation of all cryptocurrencies is $233 billion (CoinMarketCap data). The market value of Netflix, by comparison, is $161 billion, while that of a giant like Disney is $167 billion.
  • Finally, it is important that this phenomenon is widespread. The sector does not rely on just a few individual projects. There are as many as 18 cryptocurrencies that have a capitalisation of more than a billion dollars. This is a clear signal of market confidence in the potential of digital assets.

There is no shortage of inflows

Investors who buy bitcoin are convinced that there is a revolution, or at least that cryptocurrencies are heralding a major change. But it is not just about trust.

In addition to the public interest, cryptocurrencies, like all other financial assets, need capital to flourish. Capital that is definitely not lacking in the crypto world.

That said, any price recovery will take time. Cryptocurrencies “need a specific context to flourish,” says Colas in his latest report entitled “Crypto Currencies, Fruit Flies and Faith”.

If on the one hand the Google searches of the word bitcoin are in decline of 90% in comparison to the end of the last year, a datum that corresponds roughly to the recent negative trend on the markets of the most popular crypto in the world, on the other hand the number of bitcoin wallets is increasing

After the average monthly decline of almost 3% between February and June, July and August saw growth rates of 4.8% and 4% (provisional because the month is still ongoing). The figure of January’s +5.7% no longer seems unachievable.

DataTrek Research: the buzzword is trust

The lesson to be drawn, according to the well-known Wall Street market commentator, is that “it will be necessary to wait a bit for the great global interest in bitcoin to return” (and in cryptocurrencies in general).

But when that occurs, “everything will happen very quickly“. For this reason, it is necessary to monitor the indices mentioned above, which are useful tools for measuring the pulse of demand and for measuring the capital entering the sector.  

The most important key to understanding the direction of the market can be summed up in a single word: “trust”, Colas observes.

The most important element to take into consideration is the fact that “cryptocurrency investors are really convinced that they have something special and of great value“.

“If others are convinced of the same thing, then confidence will grow and so will digital asset prices“. After all, in this respect, the crypto market does not differ so much from the traditional financial markets.

Daniele Chicca

Graduated in foreign languages and literature at the University of Bologna, with a year of undergraduate at the UCL in London. A professional journalist since 2007, in time he specialized in finance, economics, and politics. After three years with Reuters in Milan, he worked for several newspapers, contributing among other things to an increase in progressive traffic on the website Wall Street Italy and offering services of various kinds for Radio Rai and press agencies AGI and TMNews (formerly Apcom). At the moment he is responsible for the drafting, the editorial line and the coordination of an important economic and financial information website.

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