Cryptocurrency markets posted minor losses in December 2018 with most cryptocurrencies finishing either flat or down on the month. Jerome Powell’s decision to hike interest rates another 25bps, the trade tension between the US and China, global economic growth concerns spiraled equity markets around the world into turmoil and have caused investors to panic and flee to less risky assets like treasuries and gold. Likewise, instability continues to fester in Washington as the government shutdown and continuation of the trade war have caused increased uncertainty in the financial markets. To add to the bearish sentiment in cryptocurrency markets, the Bakkt Bitcoin Daily Future contract, which was expected to be launched on December 12th, 2018 has gotten its launch date pushed back to January 24th, 2019.
On a positive note, Ohio businesses can now pay taxes with bitcoin and there are widespread rumors that Facebook is currently developing their own blockchain payment protocol. In other words, although we continue to witness a bear market in cryptocurrencies, both blockchain technology and cryptocurrencies are becoming even more embedded in our society. This reinforces our confident long term bullish outlook on cryptocurrency markets, although in the short term we continue to remain bearish.
This month the crypto markets were a sea of red. As of November 29th, 2018 Bitcoin had lost around 30% of its value since the start of November. Likewise, the alt-market followed in lockstep encountering an even more volatile decline. The contentious Bitcoin Cash Fork greatly contributed to the crypto market’s steep decline. The fork has ignited a “hash war” between Bitmain, the largest BCH mining manufacturer in the world and CoinGeek, one of the largest Bitcoin cash mining pools. The quarrel has caused both parties to lose a significant amount of cash and could potentially have a devastating effect on the profit margins of crypto exchanges.
On the other hand, the decline in global markets has also contributed to the sell-off in crypto markets. As liquidity tightens we are seeing investors shift from a risk-on to a risk-off mentality. This is causing institutional investors to de-risk their holdings which has lead to a drop in prices across equity markets, fixed income markets and cryptocurrency markets. Our near-term outlook continues to be bearish, however, a favorable SEC ruling on the status of Bitcoin ETFs could ignite a bullish rally in Q1 of 2019.