In January 2018, the market cap of the entire cryptocurrency market was valued around $608B but the market has suffered a steep 65% decline to its current market cap of around $211B. The cryptocurrency market is predictably volatile which is the reason stakeholders in the traditional financial markets are critical of its prospects. The chart below shows how the top five cryptocurrencies by market cap (Bitcoin Ethereum, Ripple, Bitcoin Cash, EOS) have suffered huge price drops in the year to date period.
Bitcoin declined by 54% from $13,676 in January to $6,535 currently, Bitcoin Cash has lost 81.7% from $2,470 to $450, Ethereum has declined by 73.69% from $764 to $207, EOS has plummeted by 39.72% from $8.86 to $5.48 and Ripple is down 81% from $2.25 to $0.46.
The decline in the top five coins is reflective of the general weakness in the more than 2000 altcoins and tokens left in the market. 2018’s YTD decline contrasts sharply with the impressive performance of cryptocurrencies last year. In 2017, Bitcoin was up more than 1300%, Ethereum delivered more than 8000% gains and Ripple delivered over 24,000% gains.
Cryptocurrencies have become front-page material in the financial markets over the last several years. The flow chart below provides valuable insights into the inflow and outflow of funds from the cryptocurrency markets over the last 24 hours.
$832.91 million flowed into Bitcoin from Tether, $344.60M flowed into Bitcoin from the USD, and about $232.56M flowed into Bitcoin from the South Korean Won. Tether seems to be the most dominant tool bringing in money into the cryptocurrency markets as the chart shows tether flowing into the top 20 cryptocurrencies.
Cryptocurrencies have continued to be as polarising today as Bitcoin was back in 2009. On the one hand, early-adopters believe that cryptocurrencies will bring transparency into the global economy, reduce the hold of central banks on fiscal policy, and facilitate equitable distribution of global wealth. On the other hand, critics believe that cryptocurrencies are subject to huge risks due to various instabilities such as uncertainties on macroeconomic policy, uncertainty of state administration policy and political turmoil.
Doubt and uncertainty have, in turn, caused the total volume of cryptocurrency trades to decline from about $27.12B on January 1st to about $7.57B now. In addition, the market cap of the cryptocurrency markets has declined from $596B to $211B as seen in the chart below.
One of the major reasons cryptocurrencies are weak is that their volatility is causing traditional investors to hesitate from adding cryptocurrencies to their portfolio; with the price of cryptocurrency mostly being driven by hype and sentiment. In addition, the market lacks a standardized financial model for cryptocurrencies and tax regulations in various jurisdictions are confusing at best. Also, the regulatory environment is unclear and traditional investors have a penchant for avoiding uncertainty.
Can AI and Blockchain Powered Funds De-Risk the Crypto Market
Cryptocurrencies are considered high-risk high-reward assets – for the most part, buying cryptocurrency is largely a speculative action layered on hope. However, cryptocurrency investments, when properly managed with other investments could deliver an interest low-risk medium return.
Cryptocurrency funds are small when compared to equity funds, but they represent a fast-rising market segment of the $24B funds market. Many people are aware of Wall Street-powered crypto funds and private hedge funds which are starting to gain traction buying and holding crypto funds. Managed funds such as GBTC from Grayscale, XBTC from SolidX Bitcoin Trust, and COIN from Winklevoss Bitcoin trust they could prove valuable in de-risking the cryptocurrency markets.
Nonetheless, beyond Wall Street, smaller and hungrier players are starting to leverage AI and the underlying blockchain technology that power cryptocurrencies to create new kinds of cryptocurrency portfolios. With new entrants such as TrustVerse, Blockfolio, and CryptFolio offering innovative portfolio management tools.
TrustVerse, for instance, is an AI and blockchain-based platform that is looking to promote confidence and attract sustainable long-term investments into the cryptocurrency markets with a one-stop solution for management cryptocurrency portfolios, taxes, identity, and even asset distribution after an investor is deceased.
TrustVerse will be useful for investors who are interested in designing global equity and cryptocurrency portfolios (correlation index, sentiment, and multiple data modeling) and is working on stabilizing cryptocurrencies, providing revenue generation and protecting investments with an AI-managed portfolio. The TVS token is designed to remove the information asymmetry that increases the inherent volatility of cryptocurrencies.
BlockFolio is another popular cryptocurrency portfolio management tool that supports Bitcoin and many other cryptocurrencies. BlockFolio has a mobile-first approach which enables users to track their various crypto investments on the go and features a comprehensive portfolio overview that can show how the different coins in a portfolio are faring on various exchanges. One of BlockFolios most popular features is its detailed price notifications it sends users. In such a volatile market, the price of altcoins tends to fluctuate drastically so real-time price alerts are extremely helpful in making fast and accurate inverstment decisions.
CryptoFolio is also a cryptocurrency accounting and portfolio management tool. It allows users to track their cryptocurrency, cryptocurrency miners, and other investments such as equities. CryptoFolio has trading charts that help you see how the different coins in your portfolio are faring, it has a real-time market alert system that keeps users updated and it is automated to sync trades from your wallets and exchanges.
The blockchain market is a volatile one, but with the proper management, inspection, research and, most importantly, tools it can prove to be the next market for investors to get in on which will offer many rewards.
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