Here is a simple way to determine whether prices in crypto have bottomed. The more of these items are true, the more likely it is that crypto prices have bottomed. It is for now, just a loose list of indicators. We are unlikely to have hit all of them by the time prices bottom, but the list is long in terms of things I think need to happen to be half-way certain. By the way – this list won‘t be helping to time the exact bottom. Catching a falling knife is chance and not process. But it should help to identify a sustainable move up.
This is not investment advice, this is my personal opinion.
Bitcoin
- Wallets from 2014/15 are moving coins to exchanges
- Boredom sets in, people no longer care about the bitcoin price
- “OGs” have moved on to other projects
- Prices have had a capitulation that was so painful for most people that they will never want to touch crypto again
- Prices have exaggerated to the downside as much as they did to the upside. You could probably fit a parabolic downtrend to the chart.
- People are no longer calling for the next bull-run after every bounce on twitter
- Tether is no longer in circulation
- The ETF is finally granted February 27th 2019, but the price only spikes briefly
- Tether is off the hook and starts to wildly print tethers again, manipulating prices to a level where FOMO sets back in
Everything else in Crypto
- Fully diluted supply valuations (market cap including coins held by founders) are much closer to what equity value would be, probably lower
- POW Coins without a central arbiter (yes, decentralized ones without any kind of mechanism) that are easy to 51% attack for a fraction of bitcoin miners are trading close to zero
- ICOs are giving full debt or equity rights to their token holders voluntarily
- ICOs have disappeared in their current form and the new ICOs sell equity on the blockchain
- CNBC no longer has a dedicated crypto show anywhere, Ran Neuner is reporting on cannabis stocks
- People who defrauded investors on a grander scale not only settle with the SEC, but are actually in jail
- Regulators world-wide agree on some basic protections for retail investors in crypto that are actually being enforced
- The Top 10 Coins by fully diluted market cap no longer include money grabs (I just cannot name them for ethical reasons, but I count 12 currently in the onchainfx fully diluted Top 20), but those projects where it is at least feasible that their token gain in value because their blockchain is needed (and not centrally operated as then you need no incentive) or they give equity rights and have profits on the horizon
- The nature of security vs non-security in crypto is clear
- Scams such as Cryptosoft, Bitconnect and its successors no longer have an easy way to grab your money any more than they would in regulated markets
Overall
- A “killer app” surfaces. I do not mean the possibility to transfer money without a middleman, I mean anything that causes us all to use the bitcoin network (or any other for that matter) on a daily basis
- KYC and AML procedures at exchanges are the absolute norm and not the exception
- Volumes in real USD (not in tether) will have capitulated over some time as well and then increase steadily
Feel free to add more points in the comments. It is by no means an exhaustive list.
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Lastly, the all important disclaimer: this is my personal opinion, not my professional advice. Most of all this is not investment advice in any way. Crypto assets can fluctuate widely in value and all of your capital can be lost. I have a 50/50 chance of being right. Any negative views expressed are solely aimed at the token in question, never at the development teams behind them for which I have utmost respect (if they are sincere).
