The 2019 Crypto Winter Might Be Starting But Derivatives Can Still Pull Through

November 20, 2019
“Opportunities don't happen. You create them.”
― Chris Grosser

5-Day Change

  • Bitcoin: $8,082
  • Ethereum $175.1
  • Ripple $0.251
  • Litecoin $54.99

Bitcoin Price May Hibernate Before Waking Up to Halving Pump

It’s starting to look increasingly likely that the new Bitcoin winter is here...despite the halving being only six months away. The price has seen a 7.8% decline over the week, busting through the previous support of $8,500 and approaching now $8,000, and possibly lower, if bulls the fail to keep the currency above that level.

Don’t halvings usually lead to bull runs? Well, there's only been two halvings in the past, so the data is quite scarce – but both of them saw bullish movements in the run-up. And logically, a reduction in supply should put upward pressure on the price...but it may be too soon to tell.

Why is the price falling? One big factor that’s been noticed is what’s known as ‘miner capitulation.’ Miner capitulation occurs when small miners see their profits drop due to aging hardware, falling prices, or both – and then they start dumping BTC to cover their losses.

Anything to perk Bitcoin back up? There are a lot of little things – hype from China could result in a boost as Chinese investors start exploring Bitcoin. Pornhub recently kicked off Paypal, and could soon switch to crypto for payments. Or a looming global recession could send investors into a safe haven like Bitcoin.

Wut We Think: Even if short-term gains turn bullish, it’s hard to see how that momentum could be maintained in light of fairly negative sentiment. So going back to $7,400 and testing $7,000 will probably happen before any bullish momentum can be recovered. And if you are focusing on the long-term, there’s a reason for optimism. But Bitcoin is most likely gearing up to hibernate for the winter, perhaps reemerging just on the edge of the halving. 


Crypto Derivatives Could Pull Crypto Into the Mainstream

Bakkt, CME, Monfex – all big names in pioneering crypto derivative products...and they may be the forerunners of a new crypto boom. That’s the idea anyway, to pull a stalling crypto market out of the doldrums. With compliance being the watchword as major crypto exchanges shift to being regulatory good guys instead of the enemy, derivatives represent a major step forward.

It’s all about going mainstream: A big reason for the recent resurgence of interest in crypto derivative products, like options, is about the industry pivoting to enter the financial mainstream. Many financial consultants at the moment are wary of advising their clients to invest in crypto – but if the crypto market can successfully meet regulatory standards, then that will go a long way to building that trust.

Derivatives mitigate volatility: While volatility may be desirable for the speculator, it has the opposite effect when dealing with major institutional investors like pension funds – they want a steady, stable return that is reliable. Derivatives allow an investor to mitigate the risk of a volatile asset.  

And liquidity ceases to be a problem: A lot of cryptos, especially lesser-known alts, are thinly traded, and major trades can significantly affect the price. But trading with derivatives, instead of the asset itself, prevents slippage and lets traders make big bets without having to worry about a sudden drop.

Wut We Think: Boom or not, crypto derivatives have demand and logic behind them, and there’s little doubt that even more derivative products will hit the market. Existing crypto derivative platforms like Monfex let traders hedge risk and potentially hit big scores with a well thought out trading plan. And unlike trading crypto, derivatives can’t be hacked or stolen.


Trading Spotlight: Crypto Mining

Cryptocurrency is a technological product, and that means it’s not always immediately clear how the system functions – though that could be applied to modern currency as well. Whereas fiat currency is created on demand by banks loaning funds, crypto is created in an entirely different way – by mining.

Cryptocurrency Mining: Mining is the term used in cryptocurrency to define the act of creating a new block on the blockchain, which results in a reward (in proof-of-work systems like Bitcoin.) Miners run specialized software that solves complicated algorithms, the difficulty of which is adjusted on the fly. Whoever receives the first correct answer will have successfully ‘mined’ a new block, receiving the reward. Cryptocurrency mining can be an energy-intensive process, but also results in increased security for the cryptocurrency in question, as miners serve the dual purpose of validating transactions.

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