Crypto Market Pullback Was Necessary, Now Value Proposition Of Bitcoin Is Stronger: Circle Report

Goldman Sachs-backed Circle has released its first research on “Crypto Retrospective” that talks about the ongoing bear market, the performance of the market, network activity, and Dapp platform activity and the trends the market will be seeing this year.

Starting with the bear market of 2018, the report states, due to the reason that crypto assets are related, projects with a strong business model, adoption and an experienced team still fell in tandem. However, the bear market also means clearing the market from low-quality projects.

“While the bear market has impacted many stakeholders negatively (lower mining revenues, crypto fund losses, retail investor losses, etc.), it started the process of clearing the market of low-quality projects, provided quality teams an opportunity to build, and allowed investors to invest in crypto assets that might be oversold or in companies dealing in crypto assets that might be undervalued.”

In the bear market, Bitcoin dominance stayed above 50 percent from mid-August 2018. In mid-December, 2018, it peaked at 57 percent which according to the report, “reinforces the idea that BTC is seen as a relative ‘safe haven.’”

Meanwhile, short interest was also up 95 percent for BTC and 85 percent for ETH in December while the price was down 73 and 83 percent respectively. The rising short interest indicates “bearish sentiment, as participants expect prices to continue to fall in the short run.”

The active addresses of Bitcoin in 2018 averaged at 667,000 which in early January 2018 has been 1.3 million while hitting a low of 405,000 in April. As for Ethereum, it was down 59 percent in December vs January.

The average Bitcoin transaction size in USD fell by 80% from January to December while the average Bitcoin transaction size in BTC fell by 31%. During this period, Eth transaction size in USD fell 94% while in ETH it dropped 41%.

The average fee per transaction on Bitcoin Network in December fell by 99% in comparison to January 2018 while 95% in the case of Ethereum.

2019 will see the trend moving in stablecoins, security tokens, and institutionalization. Starting with Stablecoins, they were “one of the “killer apps” in 2018,” where Tether has been in dominant position. However, its market share has declined due to banking and reserve concerns. While 2018 has been the year of “building out the underlying infrastructure,” 2019 could see increased issuances.

In terms of crypto institutionalization, 2018 saw tangible developments in the form of Bitwise Hold 10 Index, GBTC Trust and others that are existing; Nasdaq and Bakkt are pending, ETF proposals by VanEck and Bitwise, and Fidelity Digital Assets and Coinbase Custody covered Custody part. It further mentioned Endowments: Harvard, Yale, MIT, Dartmouth, Stanford, UNC and Incumbents: Square, Robinhood, Facebook, Amazon.

Circle’s first report on the crypto market says,

“The market downturn led to the revelation that this technology is still in its very early stages.” However, “But it’s important to recognize that the pullback was necessary and that after the last year, the value proposition of Bitcoin and other crypto assets is stronger.”

It concludes with the prospect that this year will see strides made in different areas covering security, scalability, user experience, institutional interest, regulatory clarity and much more.

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