Saxo Bank, a fintech specialist focused on multi-asset trading and investment, today published its quarterly outlook for global markets, and questions whether cryptocurrencies are entering a new cycle.
In its 35-pageQuarterly Outlook Q2 2018report, Saxo Bank focuses on how we are nearing the end of the largest monetary policy experiment of all time. This combined with ascendant nationalism, staggering inequality, and a widespread loss of hope among the younger generation. In its Q1 report, the bank focused on bubbles within the financial markets; for Q2 it is alerting investors to the fact that we are nearing the ‘end of a cycle like no other.’
One of the areas that are featured in its report is the cryptocurrency market and whether it’s entering a new cycle. After enjoying unprecedented highs toward the end of 2017 – with bitcoin within reach of $20,000 – digital currencies fell back to earth during the first three months of 2018. In the first quarter, bitcoin recorded its worst first quarter, dropping over 50 percent in value, making it its second-worst quarter of all time.
According to Jacob Pouncey, cryptocurrency analyst at Saxo Bank, the situation remains in a fragile state due toincreased regulatory pressureand social mediaadvertising bans. He added, though, that ‘we can’t rule out the possibility of a comeback.’
In the short term, Pouncey is of the opinion that there will be further declines due to the possible increase in regulations and a continued sell-off of large units of cryptocurrency such as the bitcoin with the Mt. Gox trustee. Not only that, but steep losses has driven market consolidation, while the sector has seen acquisitions of cryptocurrency exchanges from major organisations. These include Japanese online brokerMonex Group acquiring Coincheck, Yahoo Exchange purchasing a 40 percent stake inBitARG Exchange Tokyo, and Goldman Sachs-backedCircle acquiring Poloniex.
Despite this, however, several events could potentially serve as springboards for the cryptocurrency bull market during Q2, Pouncey said.
“If there is a significant pullback in the equity markets, there will be an inflow of money into uncorrelated assets, or assets that lie outside the reach of the traditional financial system in which cryptocurrencies are a potential alternative,” Pouncey said. “The inflow of institutional capital to the cryptocurrency market due to the increase in regulation and investor protection could lead cryptocurrencies to a positive quarter.”
With cryptocurrencies experiencing price rises during periods of global uncertainty such as Brexit, the election of President Trump, and North Korea’s missile tests, Pouncey says that this current negative digital currency cycle will eventually come to an end. As weak investors get dropped from the market remaining ones will be hanging on for some good news.